Chapter 17: Oligopoly

Chapter 17 discussed the market structure oligopoly, in which there are only a few sellers that offer similar or identical products. A main characteristic of an oligopoly is the tension between cooperation and self interest. The profit maximization (characteristic of a monopoly) can be achieved through a collusion, but it is almost impossible to uphold/create due to dominant strategy/disagreements in production levels. Thus an oligopoly operates at levels in-between those of a monopoly and perfectly competitive market.
I thought the idea of prisoner's dilemma was really interesting and how there is always a dominant strategy; especially when they related it to the arms race and common resources (it all makes sense now). I think Mankiw did a fantastic job relating this to oligopolies.
Some questions:
1.) Why are there antitrust laws that prohibit explicit agreements among oligopolists as a matter of public policy? (I know it would be like a monopoly, in that it maximizes profits, and therefore is socially inefficient...but then OPEC is legal; what are the exceptions?) Perhaps this is later in the chapter
2.) What is the difference between dominant strategy and game theory?

Chapter 16: Monopolistic Competition

The previous chapters discussed two market extremes: competitive markets and monopolies. However, this is rarely seen in the real world. Most of the time, markets are imperfectly competitive; falling between the plan cases of perfect competition and monopoly. Two scenarios of imperfect monopoly are oligopolies (a market structure in which only a few sellers offer similar or identical products) and a monopolistic competition (a market structure in which many firms sell products that are similar but not identical).
This chapter discussed a monopolistic competition in detail. A monopolistic competitive market differs from a perfectly competitive market in that it operates on the downward-sloping portion of the average-total cost curve. Also, each firm charges a price above marginal cost (like a monopoly).
I have a question about the concentration ratio. What is it calculated? Is it used to determine when governments intervene (as they sometimes do in monopolies?) Also, I was looking at the ratios and the highest ones are for markets that I see little correlation between: breakfast cereal, aircraft manufacturing, etc; how does one gain more market power in a monopolistic competition?
I also hate how all of this is up for debate. One cannot finitely answer how many firms are considered "many", etc.

Scott Adam's Secret of Success: Failure

Article Review #5
Scott Adams humorously writes about the secret of success; that he has surprisingly learned from countless failures. I found his article very intriguing, in that it counteracts the normal rationale of the starting employee. Scott Adams says that one should not follow passion (rather passion changes with success), and to be systems-oriented instead of goals-oriented. What I find most enjoyable about this article was when Adams wrote,"it [leaving out failures] leaves the impression that they [successful people] have some magic you don't."Most of the time, billionaires are idolized; how they got there seems like climbing the Alps to the average Joe. Yet, it is important to know that everyone experiences failure; and it is the successful people that use it as a tool.
Some kind of side track stuff:
When Scott Adam's wrote 'the most dangerous thing was when successful people directly give advice' was a bit ironic. Is he not a successful person giving advice? Does this cancel everything he said? Does his generalness cover all cases?
"What doesn't kill you makes you stronger" came from a famous philosopher Nietzche. Yet, Kelly Clarkson made it popular. It proves his point that all good ideas are already out there, just being rehashed.

Chapter 15: Monopoly

Chapter 15 discussed the behavior of firms that have control over the prices they charge, or monopolies (which is different than the last chapter which discussed firms in competitive markets, or price-takers). A monopoly arises when a single firm owns a key resource (monopoly resources), when the government gives a firm the exclusive right to produce a good (government-created monopolies), or when a single firm can supply the entire market at a smaller cost than many firms could (natural monopolies). These are called barriers to entry.
Because a monopoly sets its own price, its demand curve is downward sloping (if it wants to sell more output it must accept a lower price. Why is that?) Monopolies are limited in that they can only pick a point (price and quantity outputted) on the demand curve; therefore, is a monopoly really desirable? How does this affect profit, as it is assumed a firm's main goal is to maximize profit?

Chapter 14: Firms in Competitive Markets

This chapter discussed firms' decisions in competitive markets. A market is competitive if it is a price taker, there are many buyers and sellers in the market, and the good they produce is largely the same. Firms in cometitve markets want to maximize profit, which can be found at the intersection of the price (which is interchangeable with average revenue and marginal value in a competitive market) and marginal cost. If the marginal cost is greater than the marginal revenue (price, AR), then the firm should decrease its output. If MC>P, then the firm should increase its output to reach profit-maximizing level.
The chapter also discussed the idea of shutdowns and exits, which I thought was interneting. A shutdown is a short run decision where firms still have to pay for fixed costs. An exit is a long run decision where no costs are paid.
Some things that were a bit unclear: When one is trying to find maximizing profit levels on a table, can one either look at profit OR compare marginal cost or revenue? Also how is this a characteristic of perfectly competitive markets: "firms can freely enter or exit a market?"