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13. What is a feature common to both Monopolistic-Competition and Oligopoly type of markets? a. productive...

13. What is a feature common to both Monopolistic-Competition and Oligopoly type of markets?

a. productive efficiency will occur in both the short run and long run, a desirable economic property of markets.

b. many smaller sized firms can produce the good or service at lower cost per unit than larger sized firms, thus large firms fail in the long run.

c. the demand curve for each firm is not going to be purely elastic, because products are at least slightly different than potential rival firms' product and/or there may be some consumer brand loyalty.

d. Firms in both types of markets eventually will be broken up by government anti-trust laws and regulations.

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14. Which of the following is a typical characteristic of an market that has monopolistic competition?

a. firms can collude with their rivals regarding their price-setting.

b. firms tend to face demand curves that are very elastic, although not quite horizontal, because they will sell goods or services similar, but not identical to, those of rival firms in the market.

c. there are a thousands of small sized firms, each firm providing a tiny % share of the national market sales.

d. firms are always undercutting rival firms' prices until all the firms in its market eventually go bankrupt and close down, in the long run.

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15. Both oligopoly and monopoly market structures tend to form if or when:

a. the product, service or production processes do NOT involve patents or exclusively licensing.

b. there are no production cost advantages when firms produce a large volume, in other words, no economies of scale

c. high barriers to entry into an industry, such as large capital (K) capacity requirements and start-up costs, longstanding reputation or past mergers (consolidation of firms).

d. each firm’s product is identical, standardized and no different from other firms’ product in the market.

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16. Which is considered a potential benefit to society of markets that are oligopolies?

a. the firms may act like a cartel and set prices low to attract and benefit consumers.

b. prices of products fluctuate up and down, wildly and daily.

c. rivalry between firms leads to a rapid rate of innovation, thus it promotes greater dynamic efficiency.

d. the firms can influence laws and regulations (through lobbying and campaign contributions) that benefit companies but limit competition, more than smaller firms with limited market power.

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17. One of the predictions of the oligopoly model is that:

a non-price competition is uncommon and price-cutting competition among rivals is common.

b prices tend to remain relatively stable despite short-run fluctuations in market demand.

c the firms' costs of production (raw material, labor, advertising) remain constant over time.

d only one buyer (monopsony) will result in the long run.

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Answer #1

For question 13 -

Statement - What is a feature common to both Monopolistic-Competition and Oligopoly type of markets?

Answer - d. Firms in both types of markets eventually will be broken up by government anti-trust laws and regulations.

Explanation - In a fair and competitive economic system, both monopolistic competition and oligopoly eventually become exploitative towards the consumers. This happens because once they start dominating the market for a certain product, they get more and more inclined towards profit maximisation at the cost of consumer service.

Due to this, most of the times such type of market systems are broken up by the government through the means of anti-trust laws and regulations.

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