Oligopoly is a common form of big business in america. automobiles, soft drinks, fast food franchises, cigarettes, beer, and cell phone services all fall into the category of oligopoly. a. what are the characteristics of an oligopoly? list and explain the three most important characteristics. b. many oligopolies are successful in earning economic profit year after year. identify and explain what characteristic of oligopoly is most responsible for the presence of long-run economic profits. c. many oligopolies sell differentiated products. list and explain three ways in which the firm may attempt to differentiate its product and explain why the firm would wish to differentiate its product.

Consider the local telephone company, a natural monopoly. the following graph shows the monthly demand curve for phone services and the company’s marginal revenue (mr), marginal cost (mc), and average total cost (atc) curves. 0 2 4 6 8 10 12 14 16 18 20 100 90 80 70 60 50 40 30 20 10 0 price (dollars per subscription) quantity (thousands of subscriptions) d mr mc atc 8, 60 suppose that the government has decided not to regulate this industry, and the firm is free to maximize profits, without constraints. complete the first row of the following table. pricing mechanism short run long-run decision quantity price profit (subscriptions) (dollars per subscription) profit maximization marginal-cost pricing average-cost pricing suppose that the government forces the monopolist to set the price equal to marginal cost. complete the second row of the previous table. suppose that the government forces the monopolist to set the price equal to average total cost. complete the third row of the previous table. under average-cost pricing, the government will raise the price of output whenever a firm’s costs increase, and lower the price whenever a firm’s costs decrease. over time, under the average-cost pricing policy, what will the local telephone company most likely do