1. Define oligopoly. Describe its characteristics. Do the same for monopolistic competition. Distinguish each from perfect competition and monopoly. Give examples of each.
2. Define the concentration ratio, show how it is calculated, and explain how it is interpreted.
3. Draw a graph which illustrates economies of scale and use it to explain why they act as a barrier to entry. What is meant by minimum efficient size? Show it on your graph. What is its significance?
4. Explain what is meant by product differentiation. In what ways can firms differentiate their products? Give examples. Explain how product differentiation creates a barrier to entry.
5. Why is the demand curve for a monopolistically competitive firm downward-sloping? What makes the gap between price and marginal revenue small? What quantity should a monopolistically competitive firm produce in the short-run? Show this graphically.
6. Suppose a typical monopolistically competitive firm is making economic profits in the short-run. What will happen in this market in the long run? How will this affect the typical firm in the industry?
7. How does the long-run equilibrium under monopolistically competition compare to the perfectly competitive outcome? How does it compare to the monopoly outcome?
8. Discuss whether monopolistic competition is good or bad in terms of efficiency.
9. What is meant by the interdependence of firms in an oligopoly? Why are they interdependent? How do they think and act as a result?
10. What is meant by a dominant strategy? How does one determine the dominant strategy in a duopoly? Be able to do so. What is the duopolist's dilemma?
11. How can oligopolists coordinate their actions? Why would they want to?
12. Describe what is meant by each of the following and tell why an oligopolist would engage in this practice: guaranteed price matching, price leadership, grim trigger, tit for tat.
13. What happens in the long-run in oligopoly? Will the firm make economic profits > 0 or not? Explain.
14. Is entry deterrence always the best strategy for an oligopolist? Why of why not? How is an entry deterrence strategy different from predatory pricing?
15. Why do we have antitrust laws? What, in general, has the U.S. tried to accomplish through the antitrust laws?
16. What is a natural monopoly? Why are they regulated instead of using antitrust? Who regulates them?
17. What rule do regulatory commissions follow in setting prices for a natural monopoly? What are some of the consequences of following this rule? Draw a graph showing the monopolist's output decision before and after regulation.
18. Describe an individual's decision about how many hours he/she would like to work. How and why might an individual react to an increase in the wage rate? In the aggregate, which effect predominates? Draw a graph showing the market supply curve of labor. Explain why it is positively (upward) sloped
19 List the factors that shift the market supply curve of labor? Explain how each will affect labor supply
20. Define marginal revenue product of labor (MRP). Explain how it is calculated. State the law of diminishing returns. How is this related to the shape of the MRP curve?
21. How much labor should the competitive firm employ in order to maximize profits in the short run? Give the general rule and explain why this results in maximum profits.
| Labor | 1 | 2 | 3 | 4 | 5 | 6 |
| Output | 15 | 28 | 39 | 48 | 55 | 60 |
22. Describe the output and substitution effects of an increase
in the wage rate in the long run.
23. How is the market wage determined? What happens if the wage is above the equilibrium level? What happens if it is below the equilibrium level? What will cause the equilibrium wage to change? How will it change? Describe the minimum wage law. What is its purpose? Show graphically the effect of the minimum wage. What problems arise because of it? Why is the effect relatively small?
24. Define elasticity of demand for labor and show how it is calculated. List and explain the determinants of elasticity. What difference does elasticity make?
25. Why do wage rates differ among occupations and geographic areas? List the causes and explain how each leads to a wage differential. What keeps these differences from being even larger? Define the following terms and explain their significance for the labor market: efficiency wages, monopsony.
26. Describe how unions can raise wages? What effect(s) do unions have on productivity?
27. Compare the earnings of men and women and of blacks and whites.
What explains these differences? How much is due to discrimination and
how much to other factors?