Microeconomics – 7. Oligopoly and Strategic Behavior

  1. Define oligopoly. Illustrate scale-economy barriers to entry.
  2. Explain the entry dilemma in oligopolistic industries.
  3. What kinds of industries are characterized by large capital requirements barriers to entry?
  4. Identify three sources of absolute-cost barriers to entry.
  5. How can product differentiation be a barrier to entry?
  6. Why are concentration ratios so important in the study of oligopoly?
  7. Distinguish between cooperative versus non-cooperative behavior.
  8. What is the difference between explicit versus tacit collusion? Which one is illegal in the United States?
  9. What are some ways that executives tacitly collude?
  10. Describe the Cartel Model and explain the pricing rule.
  11. Explain and provide examples of the Price Leadership model.
  12. Illustrate the Kinked Demand Curve model.
  13. What is the guiding philosophy of game theory?
  14. What does the Prisoner’s Dilemma game demonstrate? Explain how it works.
  15. Apply the Prisoner’s Dilemma to the case of duopoly.
  16. What is a Nash Equilibrium? Why is this concept important?

Microeconomics – 3. Demand and Consumer Behavior

  1. Consumer choice boils down to what three things?
  2. What is the difference between a cardinal and ordinal measure of utility?
  3. What is the difference between total versus marginal utility?
  4. Explain the law of diminishing marginal utility.
  5. State the utility-maximizing rule or the equimarginal principle.
  6. When is utility maximized?
  7. What is the difference between real and nominal income?
  8. What does the price elasticity of demand measure? Write out the formula.
  9. Why do we use percentages rather than absolute amounts in measuring consumer responsiveness?
  10. Define and illustrate elastic and inelastic demand.
  11. What are the four major determinants of price elasticity of demand? Explain how each affects demand elasticity.
  12. Suppose your business sells widgets and demand for your product is relatively price elastic. What would you do to raise your total revenues?
  13. Why do many airlines offer fare discounts to people who stay over on a Saturday night?
  14. Why don’t most new cars sell at their sticker price?
  15. Why do many farmers go bankrupt when crops are plentiful?
  16. If the government imposes a sales tax on a product that is highly elastic, what will happen to total tax revenues?