Economics Homework Nine Answers - Student Five

Trisha M.

1. I'll make this my "pass" question!

OK!

2. The industries from lowest price to highest price are: Perfect Competition, Perfectly Contestable Markets, Monopolistic Competition, Oligopoly, Cartel, and Monopoly

Correct!

3. (1) This quote is referring to Monopolistic Competition (2) This quote is probably referring to a Perfect Contestable Market, in which Crazy Eddie keeps his prices insanely low because there is always the threat of new competition hanging over his head. However, since the question didn't specify whether there were many other sellers or not (competition), it could also be referring to Perfect Competition, in which Crazy Eddie would want to keep his prices as low as possible to keep his customers from going to another firm. (3) This quote is referring to a Monopoly

Fantastic. Could be the model answer.

4. Monopolies are usually established when:

A license must be obtained in order to do a certain practice (reduces competition)

A valuable resource is controlled

Economies of scale reward larger companies

Patents and copyrights are obtained to keep others from producing and selling your goods

Also by operation of law, such as a cable company to have an exclusive on providing television in an area. (Minus 1)

5. A monopoly cannot simply increase its prices without limitation because, like any other firm, it is still subject to the Law of Demand no matter how powerful it becomes.

Superb.

Excellent work! 39/40. Well done!--Andy Schlafly 21:21, 14 November 2009 (EST)