Under what conditions does an oligopoly market result in the same outcome as perfect competition? What does this imply for the oligopoly's long-run profits?
What will be an ideal response?
Oligopoly results in the perfectly competitive outcome when markets are contestable and oligopolists do not or are not successful at colluding. Because prices are pushed to their long-run average costs, positive profits will not persist.
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Refer to Figure 4-17. Suppose the market is initially in equilibrium at price P1 and then the government imposes a tax on every unit sold. Which of the following statements best describes the impact of the tax?
A) The consumer's share of the tax burden is the same whether the demand curve is D1 or D2. B) The consumer will bear the entire burden of the tax if the demand curve is D2 and the producer will bear the entire burden of the tax if the demand curve is D1. C) The consumer will bear a smaller share of the tax burden if the demand curve is D1. D) The consumer will bear a smaller share of the tax burden if the demand curve is D2.
Based on price setting behavior, we know that a reduction in the unemployment rate will cause
A) no change in the real wage. B) a reduction in the real wage. C) an increase in the real wage. D) an upward shift of the PS curve.