EC 142 Unit 7 Quiz.docx - Score for this quiz 15 out of 15 Submitted Dec 5 at 8:14am This attempt took 22 minutes Question 1 1 1 pts An oligopolistic

EC 142 Unit 7 Quiz.docx - Score for this quiz 15 out of 15...

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Score for this quiz: 15 out of 15 Submitted Dec 5 at 8:14am This attempt took 22 minutes. Question 1 1 / 1 pts An oligopolistic market is consistent with: All firms making economic profits A small number of firms in the industry The existence of barriers to entry All of the above Correct! The definition of an oligopoly is “a market structure dominated by a few large producers of homogenous or differentiated products” (p. 198). We know that there are a small number of firms in this industry. We also know that there are large barriers to entry which keep the market small. Because of this, each producer has a large amount of price setting ability that helps ensure that all firms make an economic profit. In this question, all of the above are true. Question 2 1 / 1 pts The incentive to cheat is strong in a cartel because: Each firm can increase its output and thus its profits by cutting price Nice Work! The marginal revenue is greater than marginal cost at the profit-maximizing price set by the cartel
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There is a significant lack of government regulation of cartels, especially those in worldwide production The costs of production are the same for each firm, but the product demand differs Due to the mutual interdependence in the oligopoly market structure, if one firm cheats, it will increase its personal profit at the expense of all the other firms in the market. This creates a huge incentive to cheat. Question 3 1 / 1 pts Use the figures below to answer the following question(s): Refer to the above graphs. A short-run equilibrium that would produce profits for a monopolistically competitive firm would be represented by graph: A Great Job! B C D In order for profits to occur in the short run, price must be above ATC at the profit maximizing level of production. In graph d.) the firm is losing money because ATC is above the demand curve at the point where MC and MR intersect. In graph c.) MC and MR cross at the minimum point of ATC which implies zero profit. In graph B, at the intersection of MC and MR, the ATC curve is touching the demand curve and thus indicates zero economic profit. Only in graph a.) is the demand curve above ATC at the profit maximizing point of production.
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