Final Exam - Possible Short Answer Essay Questions

These questions refer predominantly to material from the lectures. Many of the questions can be addressed from the material in the text.

1.    Know  all of the assumptions of the Perfect Competition model, especially the 4 economic assumptions. Be able to explain the economic reason why each assumption is made.

2.        Explain the assumption of price-taking behavior in the model of perfect competition. Why must we make this assumption?

3.        Explain why the model of perfect competition generates the conclusion that the market will produce productive (technical) efficiency.

4.        Explain the assumption of perfect information in the model of perfect competition. Why must we make this is assumption?

5.    What are 6 conclusions/results/outcomes of the theory of perfect competition?

6.    How are the results of the perfect competition model affected if any of the assumptions on perfect prices does not hold?

7.    Name four categories of barriers to entry. Be able to give and explain an example of each.

8.    Explain how a competitive market tends to generate an "increasing concentration of capital".

9.    How does increasing returns generate an imperfect market? 

10.    What is a declining cost industry? Give an example. How is it related to the theory of perfect competition?

11.    Explain 3 different competitive strategies that firms use in the model of oligopoly.  Give one example from lecture, one example from the text,

12.    Explain the competitive strategy(s) that firms use in the model of monopolistic competition. Give one example. 

13.    What is the role of advertising in generating imperfect markets (monopolistic information)?