Question 1:

Q1 Important differences between monopolistic competition and oligopoly markets. Show your understanding of these differences by listing the following terms under the particular type of market structure. Enter appropriate number only under the specific type of market. 5 marks 1 Mutual interdependence 2 Downward sloping demand curve or AR curve 3 Few large firms 4 Relatively easy entry and exit 5 Gasoline stations 6 Homogeneous as well as differentiated products 7 Relatively high concentration ratio 8 Product differentiation- key feature 10 Slight influence of each firm on the market 11 Nestle 12 Over collusion Oligopoly Monopolistic competitionQ2 Suppose that an unregulated price-discriminating monopolist has segregated its market into two groups of buyers as shown in the tables below for Market-1 and Market-2. Assume that MC is $13 in both markets and MC = AC at all output levels. Buyers in Market-1: Quantity Total Marginal AC TC MC Price Demanded Revenue Revenue $71 0 63 55 2 48 3 42 4 37 5 33 29 Buyers in Market-1: Quantity Total Marginal AC TC MC Price Demanded Revenue Revenue $115 0 100 83 W N 71 63 4 55 48 424 Consider the following data regarding a monopoly rm and answer the questions given below it. 12 marks 15 3 9 11 13.5 43 25 18.34 17.25 16 18 20 16.20 17.70 3 Suppose that eight coffee shops have market share in the local coffee market as 20, 16, 18, 10, 9, 8, 6 and 13 percent (as percentages of total quantity of coffee sold). > What is the four-rm concentration ratio and I-lI-II? What is the type of concentration? Why? 2 marks > If the top 4 sellers combined to form a single rm, what would happen to the four-rm concentration ratio and to the I-IHI? Is there any change in the type of concentration? Why? 2 marks Complete the following table and answer the questions 5 to 9 given below. (Use TR and TC approach). Given price = $40 per unit. 10 marks