1. Distinguish between a horizontal merger and a vertical merger.  Give one example of a recent merger.

2. What is the main difference between the demand curves for the perfect competitor and the monopolist?  Explain the difference between the firm's demand curve for each and then for the market for each.

3. In what ways is government involved with the creation of barriers to entry?

4. Explain the difference between informational advertising and persuasive advertising.  Give an example of a product that would be the subject of each type of advertising and explain why that type of advertising fits the product.

5. Explain how a monopolist can increase profits by price discriminating.  What are the conditions necessary for price discrimination?

Project and Analysis Questions

6. There are six characteristics for a competitive market that can help an economy achieve the virtues of competition. The six characteristics are:

• Many firms
• Identical products
• MC = p
• Low barriers to entry
• Zero economic profit
• Perfect information

However, these characteristics don't always occur.  Pick a market for a good or service with which you are familiar (for example, college textbooks or car insurance-but don't use these examples).  Be sure you select a good or service produced by firms operating to make a profit.  Don't pick something produced by the government or a non-profit firm. 

Answer the following questions:

A)  Explain the market you selected.

B)  In the market you selected, which of these six characteristics is present? 

C)  Which of the characteristics is absent? 

D)  Pick one of the absent characteristics.  Provide evidence to support your judgment that it is missing. 

7.  Utilizing the chicken wing production function that we completed in the Unit 2 homework assignment which would have the following answers, respond to the questions given, assuming the firm is a perfectly competitive firm:

A) Assume that the selling price for chicken wings is $2.50.  What would be the profit maximizing rate of output?

B)  Would the firm be generating profit above all costs at that selling price?

C)  If the price of chicken wings drops to $2.00, how many chicken wings should be produced then?  Are you making profit above all costs at $2 chicken wings?

D)  At what price would be the short-run breakeven point?  At what price should the firm shut down?

8.   Find an article about an oligopolist or oligopoly, and use it to satisfy each of the following instructions and questions:

A)  Copy and paste the article into your homework assignment.  Be sure and cite your reference for where the article came from indicating the source, author, title, date, and page for the article you have chosen.

B)  Write a short summary addressing the following items:

• Explain what product and market you will be discussing.
• Structural Characteristics: Explain whether at least one of the following characteristics are present: only a few firms in the market, large market shares for one or more firms in the market, high concentration ratios, high barriers to entry or the availability of only a few substitutes.
• Conduct: Indicate whether at least one of the following is present: interdependence among the firms in the market, collusion, price leadership, price wars, price fixing, allocation of market shares, heavy non-price competition, predatory price cutting, antitrust problems, control of distributors or resources, very little entry, very little exit, the ability to set prices for the market (price making), sticky price adjustments, slow responsiveness of production to profit changes, slow adoption of new technologies.
• Performance: Indicate whether at least one of the following is present: high long-run profits (or very low prices and profits as a result of predatory pricing), excessively high prices, inadequate output (or shortages), inefficient utilization of a firm's capacity (price far above average cost), inefficient resource utilization (price above the marginal cost of resources).