Economic Questions!!?

Question

Can someone please help me with this economic questions!! I will really appreciate it . thanks a lot for those who helped:

1. Suppose the minimum point of the LRAC curve of a soft-drink firms cola is $1 per liter.Under conditions of monopolistic compettion, will the price of a liter bottle of cola in the long run be above $1, equal $1, less than $1, or impossible to determine?

2. List four goods or services that you have purchased that we produced by an oligopolist. Why are these industries oligopolistic, rather than monopolistically competitive?

3. What might be a general distinction between oligopolists that advertise and those that do not?

Thanks a lot again for those who helped.

Answer 1

1) I could appeal to the envelope theorem, but you don't really need it to answer this. Remember at what point monopolistic competitors set their price (is it average cost or marginal cost?), and this should direct you to the answer.

2) Consider the difference between oligopoly and monopolistic competitor; it's not so much the number of firms as their structure and competitive nature of the market. If it helps, an oligopolist tends to have
* strong product differentiation (versus mere non-price competition for monopolistic competitors, and versus unique goods for monopolists)
* Increasing returns to scale over a long production level (ie, efficiencies are maximized at a high output level), which tends to limit the number of firms, whereas monopolistic competitors may have increasing returns to scale over a shorter period

3) If you consider advertising to be a form of non-price competition (remember that oligopolists do not compete based on price so much as product differentiation), you can either consider advertising as a "feature" of the product, or you can consider it as signaling behavior in a competitive framework (consider game theory here).

Hope this helps. Good luck.