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Economics Homework Nine Answers - Student Nine (view source)

Revision as of 03:53, November 16, 2009

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Economics homework 9

Mark B.

1. The Airliner building industry is an oligopoly. There are few companies, the two major ones being Boeing and Airbus; it is very difficult to start a new company; and the airplanes are mostly similar.

:Superb examples.

2. Perfect Competition; Perfectly Contestable Markets; Monopolistic Competition; Oligopoly; Cartel; Monopoly.

:Correct.

3. 1) Monopolistic Competition

2) Perfectly Contestable Markets

3) Monopoly

:Hmmm, I think #2 is perfect competition. Why else would such aggressive advertising be used? (Minus 1).

4. 1) Governments sometimes create monopolies by operation of law.

2) Economies of scale sometimes create a monopoly.

3) Control of a valuable resource can produce a monopoly.

4) Governments can grant monopolies by issuing patents and copyrights.

5) The licensing of professionals can sometimes create a barrier to entry.

:Superb.

5. The law of demand prevents a monopoly from increasing its prices without limitation. Despite the fact that a monopoly has no competitors, the law of demand still applies because some people will start buying substitutes.

:Excellent ... but note that there are no perfect substitutes. The income effect is more important here than the substitution effect, with respect to the Law of Demand.

:Great work. 39/40.--[[User:Aschlafly|Andy Schlafly]] 22:53, 15 November 2009 (EST)
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