KEY893F - BUSINESS 802 FINAL EXAM KEY FALL 1989 MANAGERIAL...

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Sheet1 Page 1 BUSINESS 802 FINAL EXAM KEY FALL 1989 MANAGERIAL ECONOMICS SHORT ANSWER (5 points each) 1. A. Both. Both perfectly competitive and monopoly market structures are characterized by downward sloping industry demand curves. Downward sloping industry demand curves result from the law of diminishing marginal utility discussed earlier in the book. B. Perfect competition. Horizontal firm demand curves in perfectly competitive markets reflect the fact that such firms are price takers, and imply that P = MR in these markets. C. Monopoly. Monopoly is characterized by a lack of competition from close substitutes. Thus, highly differentiated output is a key characteristic of monopoly markets. D. Monopoly. High barriers to entry limit competition from rivals able to offer close substitutes. Thus, high barriers to entry are a key characteristic of monopoly markets. E. Both. Excess profits in short-run disequilibrium reflect the effects of unexpected changes in industry demand and supply relations. They are observed in all types of market structures, including perfect competition and monopoly. 2. A. Both. Both monopolistically competitive and oligopoly market structures are characterized by downward sloping industry demand curves. Downward sloping industry demand curves result from the law of diminishing marginal utility discussed earlier in the book. B. Oligopoly. Kinked firm demand curves in oligopoly markets reflect competitor matching of price cuts, but a failure by competitors to match price increases. This stems from the oligopoly firm's desire to maintain market share, and results in somewhat sticky market prices. C. Both. Monopolistic competition and oligopoly markets are characterized by a lack of competition from identical substitutes. Thus, differentiated output is a key characteristic of both types of market structure. D. Oligopoly. High barriers to entry limit rivals' ability to offer close substitutes. Thus, high barriers to entry are a key characteristic of oligopoly markets. E. Oligopoly. Excess profits in long-run equilibrium reflect the effects of high barriers to entry. They are observed in oligopoly market structures, but not in those markets characterized as monopolistically competitive. 3.
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This note was uploaded on 07/31/2011 for the course ECON 1201 taught by Professor Smith during the Spring '11 term at Waseda University.

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KEY893F - BUSINESS 802 FINAL EXAM KEY FALL 1989 MANAGERIAL...

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