Economics Homework Nine Answers - Student One

DeborahB.

2\. Order the types of industries from those having the lowest price (due to the greatest competition) to those having the highest price (due to the least competition).

1) Perfect Competition (MC=MR at a lower point P, where P=ATC)

2) Perfectly Contestable Markets

3) Monopolistic Competition

4) Oligopoly

5) Cartel

6) Monopoly (MC=MR is how the price is determined)

Excellent!

3\. Explain which specific type of industry (e.g., oligopoly or something else) each of these quotes probably refers to: (1) "She's the finest hair stylist in town; no one has her special style!", (2) "Crazy Eddie ... his low prices are INSANE!", (3) "Don't like his prices? He's the only one in town selling what you need."

1) Monopolistic Competition

2) Perfect Competition

3) Monopoly

Superb!

4\. List how monopolies can be established. Monopolies can be established several different ways.

1) Government sometimes creates monopolies by operation of law

2) The licensing of professionals creates a barrier to entry.

3) Control of a valuable resource can also create a monopoly.

4) Economies of scale can create a monopoly by rewarding the biggest company with the lowest average cost.

5) Government grants of monopoly such as patents and copyrights.

Terrific.

5\. What prevents a monopoly from increasing its prices without limitation? The Law of Demand: demand will decrease as the price increases simply because people will buy less as the price increases. People have limits on what they will spend.

Fantastic.

Perfect! 40/40. Well done!--Andy Schlafly 19:12, 14 November 2009 (EST)