曼昆经济学原理英文版文案加习题答案15章.docx
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曼昆经济学原理英文版文案加习题答案15章
sticCompetition
WHAT’SNEWINTHESEVENTHEDITION:
Therearenomajorchangestothischapter.
LEARNINGOBJECTIVES:
Bytheendofthischapter,studentsshouldunderstand:
whatmarketstructuresliebetweenmonopolyandcompetition.
competitionamongfirmsthatselldifferentiatedproducts.
howtheoutcomesundermonopolisticcompetitionandunderperfectcompetitioncompare.
thedesirabilityofoutcomesinmonopolisticallycompetitivemarkets.
thedebateovertheeffectsofadvertising.
thedebateovertheroleofbrandnames.
CONTEXTANDPURPOSE:
Chapter16isthefourthchapterinafive-chaptersequencedealingwithfirmbehaviorandtheorganizationofindustry.Theprevioustwochaptersdevelopedthetwoextremeformsofmarketstructure—competitionandmonopoly.Themarketstructurethatliesbetweencompetitionandmonopolyisknownasimperfectcompetition.Therearetwotypesofimperfectcompetition—monopolisticcompetitionandoligopoly.Thischapteraddressesmonopolisticcompetitionwhilethefinalchapterinthesequenceaddressesoligopoly.TheanalysisinthischapterisagainbasedonthecostcurvesdevelopedinChapter13.
ThepurposeofChapter16istoaddressmonopolisticcompetition—amarketstructureinwhichmanyfirmssellproductsthataresimilarbutnotidentical.Monopolisticcompetitiondiffersfromperfectcompetitionbecauseeachofthemanysellersoffersasomewhatdifferentproduct.Asaresult,monopolisticallycompetitivefirmsfaceadownward-slopingdemandcurvewhilecompetitivefirmsfaceahorizontaldemandcurveatthemarketprice.Monopolisticcompetitionisextremelycommon.
KEYPOINTS:
Amonopolisticallycompetitivemarketischaracterizedbythreeattributes:
manyfirms,differentiatedproducts,andfreeentry.
Thelong-runequilibriuminamonopolisticallycompetitivemarketdiffersfromthatinaperfectlycompetitivemarketintworelatedways.First,eachfirminamonopolisticallycompetitivemarkethasexcesscapacity.Thatis,itchoosesaquantitythatputsitonthedownward-slopingportionoftheaverage-total-costcurve.Second,eachfirmchargesapriceabovemarginalcost.
Monopolisticcompetitiondoesnothaveallofthedesirablepropertiesofperfectcompetition.Thereisthestandarddeadweightlossofmonopolycausedbythemarkupofpriceovermarginalcost.Inaddition,thenumberoffirms(andthusthevarietyofproducts)canbetoolargeortoosmall.Inpractice,theabilityofpolicymakerstocorrecttheseinefficienciesislimited.
Theproductdifferentiationinherentinmonopolisticcompetitionleadstotheuseofadvertisingandbrandnames.Criticsofadvertisingandbrandnamesarguethatfirmsusethemtomanipulateconsumers’tastesandtoreducecompetition.Defendersofadvertisingandbrandnamesarguethatfirmsusethemtoinformconsumersandtocompetemorevigorouslyonpriceandproductquality.
CHAPTEROUTLINE:
I.BetweenMonopolyandPerfectCompetition
A.Thetypicalfirmhassomemarketpower,butitsmarketpowerisnotasgreatasthatdescribedbymonopoly.
B.Firmsinimperfectcompetitionliesomewherebetweenthecompetitivemodelandthemonopolymodel.
C.Definitionofoligopoly:
amarketstructureinwhichonlyafewsellersoffersimilaroridenticalproducts.
1.Economistsmeasureamarket’sdominationbyasmallnumberoffirmswithastatisticcalledaconcentrationratio.
2.Theconcentrationratioisthepercentageoftotaloutputinthemarketsuppliedbythefourlargestfirms.
3.Inthe.economy,mostindustrieshaveafour-firmconcentrationratiounder50%.
D.Definitionofmonopolisticcompetition:
amarketstructureinwhichmanyfirmssellproductsthataresimilarbutnotidentical.
1.CharacteristicsofMonopolisticCompetition
a.ManySellers
b.ProductDifferentiation
c.FreeEntry
Figure1
E.Figure1summarizesthefourtypesofmarketstructure.Notethatitisthenumberoffirmsandthetypeofproductsoldthatdistinguishesonemarketstructurefromanother.
Drawatablewiththefourtypesofmarketsacrossthetop.Createrowsforvariousmarketcharacteristicssuchastypeofproductsold,numberoffirms,controloverprice,freedomofentryandexit,andabilitytoearnprofitinthelongrun.Studentswillthenbeabletoseehowthesecharacteristicsrelatetooneanother.
Activity1—ThinkofaFirm
Type:
In-classassignment
Topics:
Marketstructure
Materialsneeded:
None
Time:
15minutes
Classlimitations:
Worksinanysizeclass
Purpose
Thisassignmenthelpsstudentsrelatetheconceptofmarketstructuretotherealworld.
Instructions
Asktheclasstoanswerthefollowingquestions.Aftertheyhaveansweredallofthem,askthestudentstosharetheiranswerswithaneighbor.Asktheneighboringstudenttoevaluatetheanswertothelastquestion.Listthefourmarketstructuresontheboardandaskforexamplesthatfiteachcategory
1.Writethenameofaspecificfirm.Itshouldbearealcompany,nothypothetical.
2.Whatproductsorservicesdoesthisfirmsell?
Ifthefirmsellsawidevarietyofgoods,chooseasingleitemtoanswerthefollowingquestions.
3.Whatotherfirmscompetewiththiscompany?
Aretheremanycompetitors,onlyafew,ornone?
4.Dothecompetingfirmssellexactlythesameproductordoeseachcompanyproducegoodswithspecialcharacteristics?
5.Categorizetheindustryasoneofthefollowingmarketstructures:
a.Perfectcompetition
—manyfirms
—identicalproducts
b.Monopoly
—onefirm
—uniqueproduct
c.Oligopoly
—afewfirms
—standardordifferentiatedproduct
d.Monopolisticcompetition
—manyfirms
—differentiatedproducts
CommonAnswersandPointsforDiscussion
Manystudentswillchoosecompaniesthatproduceconsumergoods,whereproductdifferentiationisthemostimportantcharacteristic.Mostoftheseindustriesareeitheroligopoliesormonopolisticallycompetitive.Afewstudentsmayhaveexamplesofmonopoly,particularlyutilitiesorpatentedmedicines.Almostnoonewillgiveanexampleofperfectcompetition.
Perfectcompetition,whileaneconomicideal,doesnotaccuratelydescribeallsectorsoftheeconomy.Explainingthatperfectcompetitionisaspecialcase(andaddingsomeexamplesofcompetitiveindustries)willhelpstudentsunderstandwhycompetitivefirmsfaceahorizontaldemandcurveandhavenocontroloverthepricesoftheirproducts.
Somestudentsmayhavequestionsaboutthedifferencesbetweenoligopolyandmonopolisticcompetition.Differentiatingbetweena“few”and“many”isnotalwayseasy.Measuresofmarketconcentrationcanbeusedtoexplainthedifferencebetweenthesetwoimperfectlycompetitivemarketstructures.
II.CompetitionwithDifferentiatedProducts
A.TheMonopolisticallyCompetitiveFirmintheShortRun
1.Eachfirminmonopolisticcompetitionfacesadownward-slopingdemandcurvebecauseitsproductisdifferentfromthoseofferedbyotherfirms.
2.Themonopolisticallycompetitivefirmfollowsamonopolist'sruleformaximizingprofit.
Explaintostudentsthatproductdifferentiationgivesthesellerinamonopolisticallycompetitivemarketsomeabilitytocontrolthepriceofitsproduct.Inasense,eachfirmisamonopolyintheproductionofitsparticularversionoftheproduct.Thisisreflectedbythefactthatthesefirmsfaceadownward-slopingdemandcurve.Pointoutthatthegraphlookssomethinglikeamonopoly,butthatthedemandthefirmfaceswilllikelybemuchflatter(becauseitwillbemoreelastic).
a.Itchoosestheoutputlevelwheremarginalrevenueisequaltomarginalcost.
b.Itsetsthepriceusingthedemandcurvetoensurethatconsumerswilldemandexactlytheamountproduced.
Figure2
3.Wecandeterminewhetherornotthemonopolisticallycompetitivefirmisearningaprofitorlossbycomparingpriceandaveragetotalcost.
a.IfP>ATC,thefirmisearningaprofit.
b.IfPc.IfP=ATC,thefirmisearningzeroeconomicprofit.
B.TheLong-RunEquilibrium
1.Whenfirmsinmonopolisticcompetitionaremakingprofit,newfirmshaveanincentivetoenterthemarket.
a.Thisincreasesthenumberofproductsfromwhichconsumerscanchoose.
b.Thus,thedemandcurvefacedbyeachfirmshiftstotheleft.
c.Asthedemandfalls,thesefirmsexperiencedecliningprofit.
2.Whenfirmsinmonopolisticcompetitionareincurringlosses,firmsinthemarketwillhaveanincentivetoexit.
a.Consumerswillhavefewerproductsfromwhichtochoose.
b.Thus,thedemandcurveforeachfirmshiftstotheright.
c.Thelossesoftheremainingfirmswillfall.
3.Theprocessofexitandentrycontinuesuntilthefirmsinthemarketareearningzeroprofit.
a.Thismeansthatthedemandcurveandtheaverage-total-costcurvearetangenttoeachother.
b.Atthispoint,priceisequaltoaveragetotalcostandthefirmisearningzeroeconomicprofit.
Figure3
Rememberthatstudentshaveahardtimeunderstandingwhyafirmwillcontinuetooperateifitisearning“only”zeroeconomicprofit.Remindthemthatzeroeconomicprofitmeansthatfirmsareearninganaccountingprofitequaltotheirimplicitcosts.
Pointouttostudentsthat,justlikefirmsinperfectcompetition,firmsinmonopolisticcompetitionalsoearnzeroeconomicprofitinthelongrun.Showthemthatthisresultoccursbecausefirmscanfreelyenterthemarketwhenprofitsoccur,drivingthelevelofprofitstozero.Anymarketwithnobarrierstoentrywillseezeroeconomicprofitinthelongrun.
4.Therearetwocharacteristicsthatdescribethelong-runequilibriuminamonopolisticallycompetitivemarket.
a.Priceexceedsmarginalcost(duetothefactthate