Economics Homework Nine Answers - Student Nine

Economics homework 9

Mark B.

1\. The Airliner building industry is an oligopoly. There are few companies, the two major ones being Boeing and Airbus; it is very difficult to start a new company; and the airplanes are mostly similar.

Superb examples.

2\. Perfect Competition; Perfectly Contestable Markets; Monopolistic Competition; Oligopoly; Cartel; Monopoly.

Correct.

3\. 1) Monopolistic Competition

2) Perfectly Contestable Markets

3) Monopoly

Hmmm, I think #2 is perfect competition. Why else would such aggressive advertising be used? (Minus 1).

4\. 1) Governments sometimes create monopolies by operation of law.

2) Economies of scale sometimes create a monopoly.

3) Control of a valuable resource can produce a monopoly.

4) Governments can grant monopolies by issuing patents and copyrights.

5) The licensing of professionals can sometimes create a barrier to entry.

Superb.

5\. The law of demand prevents a monopoly from increasing its prices without limitation. Despite the fact that a monopoly has no competitors, the law of demand still applies because some people will start buying substitutes.

Excellent ... but note that there are no perfect substitutes. The income effect is more important here than the substitution effect, with respect to the Law of Demand.

Great work. 39/40.--Andy Schlafly 22:53, 15 November 2009 (EST)