Oligopoly - CORRECT ANSWER a market dominated by a small number of firms, whose actions, directly affect one another's profits, making the fates of
... [Show More] the firms interdependent
The four-firm concentration ratio - CORRECT ANSWER the percentage of sales accounted for by the top four firms in a market or industry
The higher the concentration ratio - CORRECT ANSWER the greater is the degree of market dominance by a small number of firms
An effective monopoly is said to exist when - CORRECT ANSWER the single-firm concentration ratio is above 90%, CR1 > 90
A market is effectively competitive when - CORRECT ANSWER the concentration ratio is below 40%, CR4 < 40
A loose oligopoly is when - CORRECT ANSWER 40% < CR < 60%
A tight oligopoly is when - CORRECT ANSWER the concentration ratio is above 60%, CR4 > 60
The Herfindahl-Hirschman Index is defined as - CORRECT ANSWER the sum of the squared market shares of all firms
The HHI's properties include - CORRECT ANSWER the index counts the market shares of all firms, not merely the top 4 or 8; the more unequal the market shares of a collection of firms, the greater is the index because shares are squared; other things being equal, the more numerous the firms, the lower is the index
What is the difference between pure competition and pure monopoly? - CORRECT ANSWER under pure competition, market price equals average cost, leaving all firms zero economic profits; under a pure monopoly, a single dominate firm earns maximum excess profit by optimally raising the market price
T/F: There is no single model of competition within oligopoly - CORRECT ANSWER True; there are multiple
As the number of firms increases, the quantity equilibrium played by identical oligopolists - CORRECT ANSWER approaches the purely competitive (zero-profit) outcome
Price rigidity can be explained by the existence of - CORRECT ANSWER kinked demand curves for competing firms
What explains the demand curve's kink? - CORRECT ANSWER demand is elastic for price increases
The kinked demand curve model presumes that - CORRECT ANSWER the firm determines its price behavior based on a prediction about its rivals' reactions to potential price changes
Setting a low price is each firm's more - CORRECT ANSWER profitable alternative, regardless of what action its rival takes
Market skimming - CORRECT ANSWER strategy of price discriminating over time involves setting a high price to pioneer adopters (who have relatively inelastic demand), then later lowering the price to attract mass-market users (whose demand is more elastic)
The learning curve - CORRECT ANSWER as a firm gains cumulative experience producing a new product, it can expect to reduce its cost per unit by reengineering and improving the production process [Show Less]