honeycfa

The demand curves faced by monopolistic competitors is:

A) elastic due to the availability of many close substitutes.

B) not sensitive to price due to absence of close substitutes.

C) inelastic due to the availability of many complementary goods.

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The demand for products from monopolistic competitors is elastic due to the availability of many close substitutes. If a firm increases its product price, it will lose customers to firms selling substitute products.

honeycfa

Monopolistic competition differs from pure monopoly in that:

A) barriers to entry are high under monopoly, but low under monopolistic competition.

B) monopolists maximize profit; monopolistic competitors do not.

C) monopolistic competitors are price takers, monopolists are not.

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Monopolistic competition is characterized by the low barriers to enter its competitive markets. In contrast, a monopoly exists only where there are high barriers to market entry.

honeycfa

Under which type of market structure are the production and pricing alternatives of a firm most affected by the decisions of its competitors?

A) Oligopoly.

B) Monopolistic competition.

C) Perfect competition.

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An oligopoly market structure is characterized by a small number of firms producing similar or differentiated products, with a high degree of interdependence among competitors. Each firm’s optimal price and output are strongly affected by the pricing and output decisions of its competitors.

honeycfa

Characteristics of an oligopoly least likely include:

A) interdependence among competitors.

B) significant barriers to entry.

C) identical products.

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In an oligopoly, a small number of producers sell products that can be similar or differentiated. An oligopoly typically features significant barriers to entry including economies of scale. Pricing and output decisions by each firm directly influence the decisions of competing firms.

honeycfa

The type of economic market that features a large number of competitors offering differentiated products is best characterized as:

A) perfect competition.

B) oligopoly.

C) monopolistic competition.

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Monopolistic competition is used to describe markets where there are a large number of competitors producing differentiated products.

In perfect competition all firms produce identical products. In an oligopoly there is a small number of firms.