Introductory Economics
Eco 108
HW 7

  1. How are monopoly and monopolistic competition alike?

  2. How are perfect competition and monopolistic competition alike?

  3. Draw an AC, MC, MR, and demand curve for a monopolistic competitor who is making positive profits in the short run. Label the equilibrium price, quantity, and profit. Describe what will happen in the long run.

  4. Is monopolistic competition efficient? why or why not? What is good about monopolistic competition?

  5. Suppose we have an oligopoly. If this oligopoly has successfully formed a cartel and is behaving as a monopolist, is this a Bertrand equilibrium? Why or why not? If not, what is the Bertrand equilibrium?

  6. Suppose we have an oligopoly where each firm is producing where price is equal to marginal cost. Is this a Cournot equilibrium? Why or why not? Describe what happens to the Cournot equilibrium price and quantity as the number of firms in the oligopoly grows, what happens when the number of firms shrinks?

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