2. Why Do Phone Companies Offer Incentives To Purchase 2-Year Wireless Service Agreements?

Md Milad Hussain

Mr. Adedoyin Oshiyoye

2302 Macroeconomics

17, April 2017 1. What entry barriers exist in: (a). The fast food industry (b). Cable television (c). The auto industry (d). Potato chips (e). Beauty parlors (Oligopoly)

A. The fast food industry: an entry barrier is an obstacle that makes it difficult for new competition to emerge in a market and enables oligopolies to exist. In the fast food industry, there is lots of advertising or non price competition that influences the preferences of consumers towards the established chains.

B. The cable television: the cable television market creates a barrier to entry by marking customers sign a contract. If a competitor emerges , the customer would have

Beauty parlors: where the social aspect is just as important as the haircut. People often choose their beauty parlor based on where their friends go, so if a new place opens up, they would not want to go without their friends.

2.Why do phone companies offer incentives to purchase 2-year wireless service agreements? (oligopoly)

There are only a handful of sellers who cater to a large number of buyers. Since the products are more or less homogeneous and the firms are interdependent, i.e. each firm has complete knowledge of its rival firm's pricing structure, their is no incentive for the firms to compete on the basis of prices. This is because price competition would lead to unnecessary price cutting and thus lower profits. This is the reason firms tend to compete on terms other than price, i.e. through advertising and other schemes and offers so as to cover a larger market share.

3.How might concentration ratio (99%) in the credit card industry affect the annual fees and interest charges for credit card services? (Oligopoly)

The concentration ratio shows the percents share of a market, the top few producers hold. In the credit card industry, four companies own 99% of the market share. If they coordinate, they can set higher annual fee interest without losing too much demand for

According to the world view on page 275 of the text, what gives brand names their value? (Monopolistic competition)

Because brand names command a premium price among customers they are assets for the firm. This value is reflected in the world view table and is reflected in corporate stock prices and in the price of a firm or division of affirm when it is sold.

5. Why is the mix of output produced in competitive markets more desirable than that in monopolistically competitive markets?

It is the level of efficiency. In a competitive market, the mix of output produced is most allocativly efficient and productively efficiency. The two types of efficiency which exist in the competitive markets: 1. Allocative efficiency.2. Productive efficiency.

6. Discuss the differences between Oligopoly and Monopolistic competition

Oligopoly market is characterized by the few sellers and in some situation sellers are two. Each seller has sizeable share of market. There is intense competition. Product may or may not identical. Demand curve for firm is missing in the market. Each firm has to take the course of action very cautiously selling cost is also