Group Assignment: Monopolistic Competition and Oligopoly

List group members who attended at least 90% of the meeting:

1.Teresa
2.Alisha
3.Federico
4.Lehi
5.
6.

Instructions
As a group, choose a group member to complete this document. This person will submit the
document at the end of the meeting.

1. Assume that the short-run cost and demand data given in the table below confront a
monopolistic competitor selling a given product and engaged in a given amount of
product promotion. Compute the marginal cost and marginal revenue of each unit of
output and enter these figures in the table.

Output Total cost Marginal cost Quantity Price Marginal

demanded revenue

0 $ 75 $0 0 $180 $0

1 120 45 1 165 165

2 135 15 2 150 135

3 165 30 3 135 105

4 210 45 4 120 75

5 270 60 5 105 45

6 345 75 6 90 15

7 435 90 7 75 -15

BYU-Idaho 1 ECON 150: Microeconomics

 8 540 105 8 60 -45

9 660 120 9 45 -75

10 795 135 10 30 -105

a. At what output level and at what price will the firm produce in the short run? 4

What will be the total profit? 270

b. In the long run, what will happen to:

Demand for the individual firm’s good? Demand will increase until marginal revenue
equals average total cost.

Price for the individual firm’s good? Price will decrease.

Profit for the individual firm’s good? Profit will be zero.

NOTE: If you need help, review what happens to a firm's demand, price, and profit in the
example with Sandra’s Sweets in the textbook.

2. Read the following article: “Oil Turns Higher as OPEC Agrees to Continue Output Cuts”
a. In one to three sentences, briefly summarize the main point(s) of this article.

OPEC decided to cut output to raise prices. Not all the group was in agreement
on this.
b. What does OPEC stand for? What industry type is OPEC likely a part of?
Organization Petroleum Exporting Countries They are part of the petroleum
industry.

BYU-Idaho 2 ECON 150: Microeconomics

 c. OPEC and its allies outside the cartel (so countries that are not an official part of
the group) met where? Baku, Azerbaijan

d. What did they agree to do in December 2018? How long have they agreed to
continue to follow this plan?
They agreed to cut output by 1.2 million barrels per day until the end of June
2019.

e. Which group thinks they should continue in December 2019?

Saudi Arabia

f. Which group thinks they should reassess and maybe do something different later
in the year? Russia

g. (Not from the article) Why might some of the countries want to “cheat” on the
agreement and produce more? To increase profits.

h. (Not directly from the article) Which group in this scenario is most likely to
“cheat” on the agreement? Russia
i. (There are some indications in other articles that Russia has been having a hard
time actually achieving the agreed upon cuts in production… so it may be
happening already.) We agree.

j. (Not from the article) What factors make it more likely that someone in a cartel
will “cheat” on an agreement? The temptation to increase profits . Also because
of the way the agreement wants to stay out of the publicity so something is lees
likely to be brought up about it.

3. Read the following article:  “In New York, Don’t Just Drink Your Coffee—Learn About It
First”
a. What industry type are these coffee shops likely a part of? Restaurant, food and
beverage industry.

BYU-Idaho 3 ECON 150: Microeconomics

 b. What are these coffee shops doing to try to differentiate their product? Why? What
are they hoping to achieve with this strategy? They’re trying to differentiate their
product by creating a unique experience that separates them from their
competitors. They differentiate their shops with encouraging consumers to learn
about coffee. People will be willing to pay higher prices for coffee because of the
environment the shops are providing. To increase profits and get an edge on the
industry.

BYU-Idaho 4 ECON 150: Microeconomics