monopolistically competitive industry combines elements of both competition and
ID: 1104942 • Letter: M
Question
monopolistically competitive industry combines elements of both competition and onopoly. The monopoly element results from: 46) A) high entry barriers. B) mutual interdependence in decision making. C) the likelihood of collusion. D) product differentiation. The mutual interdependence that characterizes oligopoly arises because: 47) A) the demand curves of firms are kinked at the prevailing price B) the products of various firms are homogeneous. C) each firm in an oligopoly depends on its own pricing strategy and that of its rivals. D) the products of various firms are differentiated. 8) Oligopoly is more difficult to analyze than other market models because: 48) A) of mutual interdependence and the fact that oligopoly outcomes are less certain B) the marginal cost and marginal revenue curves of an oligopolist play no part in the C) unlike the firms of other market models, it cannot be assumed that oligopolists are D) the number of firms is so large that market behavior cannot be accurately than in other market models. determination of equilibrium price and quantity profit maximizers. predicted. 49) Suppose an oligopolistic producer assumes its rivals will ignore a price increase but 49) match a price cut. In this case the firm perceives its: A) demand curve as being of unit elasticity throughout. B) demand curve as kinked, being steeper above the going price than below. C) demand curve as kinked, being steeper below the going price than above. D) supply curve as kinked, being steeper below the going price than above. 50) curve n A) the model assumes firms are engaging in some form of collusion. B) the associated marginal revenue curve is perfectly elastic at the going price. C) there is a gap in the marginal revenue curve within which changes in marginal cost will not affect output or price. D) demand is inelastic above and elastic below the going price.Explanation / Answer
46)D. Product differentiation is the key feature of monopolistic competition
47)B. Product is homogenous
48)A. Mutual interdependence is a key feature of oligopoly
49)C. Demand for a firm will be kinked and will be steeper when price is less than prevailing price
50)C. There is a gap between MR under which MC can fluctuate and makes price same
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