Describe the conditions under which a firm operates as perfectly competitive, monopolistically competitive, or a monopoly.
The following asks you to provide a short answer to each of the learning objectives outlined at the beginning of this module and prepare you for the quiz.
LO1 Describe the conditions under which a firm operates as perfectly competitive, monopolistically competitive, or a monopoly.
LO2 Identify sources of ( and strategies for obtaining) monopoly power.
LO3 Describe the marginal principle to determine the profit- maximizing price and output.
LO4 Provide an example of the relationship between the elasticity of demand for a firm’s product and its marginal revenue.
LO5 Explain how long- run adjustments impact perfectly competitive, monopoly, and monopolistically competitive firms; discuss the ramifications of each of these market structures on social welfare.
LO6 Defend whether a firm making short run losses should continue to operate or shut down its operations.
LO7 Illustrate the relationship between marginal cost, a competitive firm’s short- run supply curve, and the competitive industry supply; explain why supply curves do not exist for firms that have market power.
LO8 Explain the optimal output of a firm that operates two plants and the optimal level of advertising for a firm that enjoys market power.
LO9 Explain how beliefs and strategic interaction shape optimal decisions in oligopoly environments.
LO10 Identify the conditions under which a firm operates in a Sweezy, Cournot, Stackelberg, or Bertrand oligopoly, and the ramifications of each type of oligopoly for optimal pricing decisions, output decisions, and firm profits.
LO11 Apply reaction ( or best- response) functions to identify optimal decisions and likely competitor responses in oligopoly settings.
LO12 Identify the conditions for a contestable market, and explain the ramifications for market power and the sustainability of long- run profits.
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