Economics 202 Study questions unit # 4

Chapters 5, 6, 23 and special topic 12.

1) Describe the characteristics of an oligopoly and distinguish a perfect oligopoly from an imperfect oligopoly.

2) Use a kinked demand curve to explain why the oligopoly model leads to the formation of close bonds or collusion between individual firms.

3) Describe the characteristics of a collusive oligopoly as well as a competitive oligopoly.

4) What factors increase the likelihood that either a collusive or a competitive oligopoly will be established?

5) Evaluate a collusive oligopoly as well as a perfect monopoly.

6) Describe the following market weaknesses that may lead to a role for government to play in a market economic system: a lack of competition in the production of goods (perfect monopoly and collusive oligopoly), external benefits and costs, pure public goods, the information problem, the economic security problem, and the macroeconomic instability problem.

7) Describe the response of government to the above problems that might take the form of economic assistance, government provision of goods and services, economic regulation, and government planning and stabilization activities.

8) When government programs are established what principle to we use to measure whether they improve economic efficiency?

9) Describe the major differences between market and collective (government) action.

10)Describe the opportunity costs of government activity.

11)Describe the following public choice criticisms that potential arise from government activity: the short-sightedness problem, the rational ignorance – special interest problem, the non-selectivity problem and the bureaucratic waste problem.

12)What is the difference between “traditional economic regulation” and social regulations (health and safety regulations)?

13)Describe the impact that regulations might have as well as their costs.

14)What do our authors suggest with regards to the future direction of economic regulations?