1. MICROECONOMICS BU224
Seminar
Eight

2. Agenda Course Issues and Questions Review of Chapter 15 Concepts
Where are we going next?

8. Chapter 16 Questions:
1. Use the three conditions for monopolistic competition discussed in the chapter to decide which of the following firms are likely to be operating as monopolistic competitors. If they are not monopolistically competitive firms, are they monopolists, oligopolists, or perfectly competitive firms?
A local band that plays for weddings, parties, and so on
b. Minute Maid, a producer of individual-serving juice boxes
c. Your local dry cleaner
d. A farmer who produces soybeans

9. Chapter 16 Questions:
2. You are thinking of setting up a coffee shop. The market structure for coffee shops is monopolistic competition. There are three Starbucks shops, and two other coffee shops very much like Starbucks, in your town already. In order for you to have some degree of market power, you may want to differentiate your coffee shop. Thinking about the three different ways in which products can be differentiated, explain how you would decide whether you should copy Starbucks or whether you should sell coffee in a completely different way.

22. Chapter 15 Questions
How can cartels sow the seeds of their own destruction?
What kind of agreements may cartels work out to reduce competition among themselves?
How are the professional sports leagues like a cartel?
What happens to employment opportunities and wages paid in all non-competitive product markets? Why?
Which market structure do most real world markets approximate?

23. Chapter 15 Questions
6. In a non-collusive oligopoly if one firm increased its price what would the other firms likely do? What about a price decrease? How is this related to a kinked demand curve?

24. Chapter 15 Questions
10. Suppose you are an economist working for the Antitrust
Division of the Department of Justice. In each of the
following cases you are given the task of determining
whether the behavior warrants an antitrust investigation
for possible illegal acts, or is just an example of
undesirable, but not illegal, tacit collusion. Explain your
reasoning.
a. Two companies dominate the industry for industrial
lasers. Several people sit on the boards of directors of both
Companies.

25. Chapter 15 Questions
b. Three banks dominate the market for banking in a given
state. Their profits have been going up recently as they add
new fees for customer transactions. Advertising among the
banks is fierce, and new branches are springing up in
many locations.
c. The two oil companies that produce most of the petroleum
for the western half of the United States have decided
to forgo building their own pipelines and to share a common
pipeline, the only means of transporting petroleum
products to that market.
d. The two major companies that dominate the market for
herbal supplements have each created a subsidiary that
sells the same product as the parent company in large
quantities but with a generic name.
e. The two largest credit card companies, Passport and
OmniCard, have required all banks and retailers who
accept their cards to agree to limit their use of rival credit
cards.

27. Microeconomics
Questions?