Define the following terms and explain their importance to the study of economics
a. monopolistic competition
b. oligopoly
c. cartel
d. oligopolistic interdependence
a. Monopolistic competition is a market structure in which products are differentiated, but which otherwise has the same characteristics as perfect competition. There are many industries in the United States, particularly in retailing, that are monopolistically competitive.
b. An oligopoly is a market dominated by a few sellers, several of which are large enough relative to the total market to be able to influence the market price. Much of U.S. manufacturing is characterized by oligopoly.
c. A cartel is a group of sellers of a product who have joined together to control its production, sale, and price in the hope of obtaining the advantages of monopoly. Cartels are illegal in the United States, but are often legal elsewhere. OPEC is a good example of a cartel.
d. Oligopolistic interdependence is a fact in most oligopolies. Each oligopolist is influenced by decisions of its rivals; outcomes of its own decisions depend on the responses of rivals. The interdependence makes it very difficult to analyze oligopolistic behavior.
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A) taxation. B) borrowing from the non-bank public. C) borrowing from the banking system. D) borrowing from the Fed.
Tariffs provide domestic producers with incentives to be inefficient and operate on the basis of comparative disadvantage
Indicate whether the statement is true or false
Assume the supply function of ice cream is written as: Qs = 100 + 20P - 10Pm, where Qs is the quantity supplied, P is price of ice cream, and Pm is the price of milk ($/gallon)
If milk price increases by $2/gallon due to the policy change, how will the Qs change? A) decreases by 20 B) increases by 20 C) decreases by 10 D) increases by 10
According to the Monetarist view, the impact of expansionary monetary policy will be:
A. the same in the long run as in the short run. B. the same regardless of whether the effects of the policy are anticipated or unanticipated. C. a higher price level (inflation). D. a decrease in short-run prices and an increase in long-run prices.