Microeconomics

Directions:  Click on the "file" item at the top left of the browser window.  Click on "Save as..." from the pull down menu.   Do the necessary reading then answer the questions in the file you just saved.   When you are all done then send me your answers as email.  The best thing to do is to include the file with the questions and your embedded answers as an attachment.

NAME:___________________________

1. In answering the question "Why do the allegedly uncompetitive oligopolists make such heavy use of advertising while farmers do not?" consider aspects of the product as well as market structure and the assumptions we make in our models of the market?

2. Do you believe that there is a substantive and important difference between models of oligopoly and monopolistic competition? Enumerate your reasons.

3. If you look at data reported by the Board of Governors of the Federal Reserve Banks you will see that the economy never operates at full capacity.  If you look at data for individual firms you will find that they do not operate at full capacity. Can you think of a few reasons for maintaining excess capacity?

4. Cite the conditions under which a cartel or collusive oligopoly is likely to be effective.

5. Can you think of ways to measure the extent of monopoly power in a market?

6. Why are prices likely to be sticky in an oligopoly? Economists interpret prices as the signals of information about quality and relative worth. Does the information content of price have anything to do with sticky prices?

7. Why would a firm pursue a policy of sales maximization? What are the long and short run considerations?