CHAPTER 12 MONOPOLISTIC COMPETITION AND OLIGOPOLY REVIEW QUESTIONS 1. What are the characteristics of a monopolistically competitive market? What happens to the equilibrium price and quantity in such a market if one firm introduces a new‚ improved product? The two primary characteristics of a monopolistically competitive market are (1) that firms compete by selling differentiated products which are highly‚ but not perfectly‚ substitutable and (2) that there is free entry
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The tobacco industry has been around longer than America has been a country. It is one the biggest industries in the entire world right now. However‚ according to the article on CQ researcher by Mary H Cooper‚ smoking has been declining. This started happening in the 1960 ’s when the surgeon general issued the first link to lung cancer and smoking. Nonetheless‚ even after this warning‚ about 23 percent of adults in America smoke cigarettes (Cooper). People still smoke cigarettes even though there
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1. INTRODUCTION Oligopolies have been around ever since there is trade. However‚ it has only recently gained grounds in this age of globalisation. Never before has oligopolistic competition been so fiercely contested across so many industries. The media industry in the United States of America (US) is one such industry. As a powerful communication tool‚ the media has attracted many companies but only a handful has grown big. These media giants have dominated the local market and are currently seeking
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OLIGOPOLY INTRODUCTION In this topic the oligopoly form of market is studied. You will learn that fewness of firms in a market results in mutual interdependence. The fear of price wars is verified with the help of the kinked demand curve. Collusive forms and non-collusive forms of market are analyzed. The economic effect of the oligopoly form of market is presented. OLIGOPOLY CHARACTERISTICS The oligopoly form of market is characterized by - a few large dominant firms‚ with many small ones‚ - a
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Banning Cigarettes Do you smoke cigarettes? Do you know what is inside of those cigarettes that you are smoking? According to an article by Robert Grazian‚ cigarettes have thousands of chemicals in them (1). After witnessing my sister smoke cigarettes‚ I was curious to know why she did it so much. I decided to do an experiment on cigarettes after I made eighteen‚ which is the legal age to smoke cigarettes. I told one of my teachers about the experiment and she offered bonus points if I turned
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Cigarette Taxes The interest in cigarette taxes and their effects have been a hot topic in relation to the economy for the past 20 years. People question whether or not increased taxes really affect the demand. Do the taxes cause effects other than a change in demand? Who does this ultimately effect‚ the rich or poor? Where does the money go? So why does the government decide to impose higher cigarette taxes? They do this for two main reasons. One
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people think that the production and sale of cigarettes should be made illegal. However‚ these people tend to ignore that the positive outcome of cigarettes business brings to the society. They also falsely believe that prohibition of producing and selling cigarettes will lead people to adopt a healthier living environment. Cigarettes business is one of the most profitable industries in the world. The government receive huge amount of taxes from cigarettes companies and it actually uses the money to
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(http://www.understandinganimalresearch.org.uk/about-us/the-science-action-network/forty-reasons-why-we-need-animals-in-research/): Animal research has played a vital part in nearly every medical breakthrough over the last decade. We share 95% of our genes with a mouse‚ making them an effective model for the human body. Animals and humans are very similar; we have the same organ systems performing the same tasks in more or less the same way. Animals suffer from similar diseases to humans including
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Strategic Thinking in an Oligopoly Presented by: Michael Chai CA(M)‚ CPA‚ CFP‚ MCSM‚ MMIM 1 Oligopolistic concepts/issues: – Duopoly strategic interaction – Cournot Equilibrium – Kinked demand curve – Cartel instability 2 Cournot Model • Interdependence between firms • Max π given what one firm believes the other will produce • Decisions made simultaneously • Firms compete on non-price techniques • Simplest model is a duopoly 3 Numerical example – Duopoly • • • • Assume
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Oligopoly After reading this chapter‚ you should know: 1. The unique characteristics of oligopoly. 2. How oligopolies maximize profits. 3. How interdependence affects oligopolists’ pricing decisions. Problems for Chapter 10 1. Suppose the automobile market in the U.S. is divided as follows: General Motors 28% Ford 23% Toyota 18% Daimler-Chrysler 16% All others 15% a) What is the four firm concentration ratio? b) What is the approximate Herfindahl-Hirschman
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