Economics Homework Nine Answers - Student Two

Seth P.

1.Video game companies like Nintendo, Sony and X-box (don't know who makes X-box) is an example of an oligopoly, because there is few competitors. It takes a lot of time effort and money to make a new company with its own system and games. And most of the systems are very similar.

Superb!

2.The type of industry with the lowest price would be perfect competition. Next would be perfectly contestable markets, then monopolistic competition, then oligopoly, then cartel, and monopoly would be the highest price.

Excellent!

3.

Free skip.

4.Monopolies can sometimes be established by the government. A monopoly can also be made if you control enough of a valuable resource. If your company is big enough, you can have a monopoly. If you get a patent or copyright, you could have a monopoly.

Terrific.

5.The free market and the law of demand prevents a monopoly from increasing its price without limitation.

Right about the law of demand. Does the free market help restrain price increases by monopolies? It certainly does through the law of demand, and maybe through other ways. After all, even a monopolist has to worry about changes in technology or something else that might cost it its monopoly power.

6.The Nash equilibrium is when both firms reduce output, because the numbers indicate that is the best situation for both of them.

Not quite. You've got the need for symmetry but haven't fully gotten the dynamic movement to reach the Nash equilibrium. See model answers when ready. (Minus 1).

7.No, the government should not regulate monopolies, because the government shouldn't regulate anything in the free market.

Excellent.

8.No, the “deadweight loss” does not equal the “consumer surplus”. Deadweight loss causes people to loose consumer surplus.

Good, note that the deadweight loss can also cause the seller to lose the producer surplus. (Minus 1) (note: "lose", not "loose")

68/70. Well done with some challenging problems!!!--Andy Schlafly 20:38, 14 November 2009 (EST)