Unit 6 Assignment

Unit 6 Assignment

Student Name: Magida Taracena

1. Do the firms in an oligopoly act independently or interdependently? Explain your answer.

Oligopoly is a small number of firms that act interdependently. They are appeal to form a cartel and collude to increase profits. They can compete on price only if they produce matching products or compete on price, product quality, and marketing if they produce somewhat different products. Natural or legal barriers prevent the entry of new firms.
Firms in an oligopoly act interdependently, this means that actions taken by one firm have an impact on all the other firms in the industry. Each firm's market share is so big that any increase in market share will hurt its competitors. The result is that all the firms monitor each other's strategies and act to match or counter them. Oligopoly is an industry in which only a few firms compete. Since there are only a few firms, the trademark of oligopoly is mutual interdependence, meaning that, a firm's acts will affect the other firms. “The fact that in oligopoly each firm's actions affect its rivals is unlike the case in perfect competition or monopolistic competition, in which there are so many firms that one firm's actions have no effect on its rivals, or monopoly, in which there is only one firm and hence no rivals” (Oligopoly).

2. A monopolistically competitive firm has the following demand and cost structure in the short run:

      Output Price FC VC TC TR Profit/Loss
      0 $90 $90 $ 0 ___$90_ __$0__ __$-90_____
      1 80 ___$90_ 40 ___$130_ __$80__ __$-50_____
      2 70 ___$90_ 80 __$170__ __$140__ ___$-30___
      3 60 ___$90_ 140 __$230__ __$180_ _____$-50___
      4 50 __$90__ 220 ___$310_ __$200__ __$-110_____
      5 40 __$90__ 320 __$410__ __$200__ ___$-210____
      6 30 ____$90 440 ____$530 _$180___ _____$-350___
      7 20 ___$90_ 580 __$670__ _$140___ ____$-530____

      a. Complete...