1)Apply the concepts of monopoly, monopolistic competition and oligopoly to current economic news.

2)Suppose that the distribution of sales within an industry is as shown in the table. What is the four-firm concentration ratio for this industry?

3)Compared to perfectly competitive firms, oligopolies are:

a. more likely to consider the actions of other firms

b. less likely to consider the actions of other firms

c. neither more nor less likely to consider the actions of other firms

d. likely to produce more than the socially optimal amount of output

4)Why is there an emphasis on nonprice competition in oligopoly markets rather than on lowering prices to gain market share?

1)You are unlikely to see a true monopoly since they ar generally illegal. A good example was AT@T before it was found to be in violation of antirust law and was broken up into subsidiaries. On the other hand, oligopolies can be seen when a field is dominated by a small group of companies, such as the airline industry. Monopolistic competition can be seen regularly on the Internet when multiple companies offer what are essentially the same service and try to compete with subtle differentiation, such as pre-portioned and planned meals or shaving razors. Hopefully these examples give you a better idea of what these structures look like in the real world.

2)The four-firm concentration ratio for this industry is 38% The largest four firms control 38% of the market share. Since the four-firm concentration ratio is under 90% then there is no presence of an oligopoly

3)The answer is A. Oligopolies are more likely to consider the actions of other firms. In perfect competition the price of the good or service is equal to the marginal cost and there are numerous firms in the market. Firms in a perfectly competitive market revenue maximize. In an oligopoly there are only a few firms and they profit maximize with respect to the actions of the other firms in the market. Each firm profit maximizes with respect to their market share to control prices and output.

4)In oligopolies pricing is similar to monopolies because of the limited number of firms in the market and the difficulty of entrance into the market. The firms do not decrease prices because the consumers in the market do not respond to a change in price the same way. Each firm can sell the goods or services for different prices based off of their production capabilities so the firms are going for advertising and other nonprice maneuvers to increase output and extract consumers from their competitors.