Reading 20: Monopolistic Competition and Oligopoly LOS A习题 border, likely, market, 2010

honeycfa

LOS a: Describe the characteristics of monopolistic competition and an oligopoly.

A market that is characterized by monopolistic competition is least likely to feature:

A) low barriers to entry.

B) a small number of independent sellers.

C) sellers that produce a differentiated product.

---

 

In monopolistic competition, there is a large, not small, number of independent sellers.

honeycfa

Which of the following is most likely to be considered a characteristic of monopolistic competition?

A) Differentiated products.

B) Inelastic demand curves.

C) High barriers to entry and exit.

---

Differentiated products are a key characteristic of monopolistic competition. Although producers have downward sloping demand curves, they are typically elastic.

honeycfa

Which of the following most accurately describes why firms under monopolistic competition face elastic demand for their products?

A) The availability of many close substitutes.

B) Allocative efficiency.

C) High barriers to entry.

---

The demand for products from firms competing in monopolistic competition is relatively elastic due to the availability of close substitutes. If a firm increases its product price, it will lose customers to firms selling slightly differentiated products at lower prices.

honeycfa

Which of the following is least likely to be considered a feature that is common to both monopolistic competition and perfect competition?

A) Low or no barriers to entry.

B) Zero economic profits in the long run.

C) Extensive advertising to differentiate products.

---

The only item listed in the question that monopolistic competition and perfect competition do not have in common is the use of advertising to differentiate their products. Extensive advertising is a key feature of monopolistic competition.

honeycfa

An oligopoly is charcterized by all of the following EXCEPT:

A) large economies of scale.

B) significant barriers to entry.

C) a large number of sellers.

---

Oligopolies consist of a small number of sellers. Their products may be either similar or differentiated.

honeycfa

Monopolistic competition differs from pure monopoly in that:

A) monopolistic competitors are price takers and monopolists are not.

B) monopolistic competitors have low barriers to entry and monopolists do not.

C) monopolists maximize profits and monopolistic competitors do not.

---

Another name for monopolistic competition is a competitive price searcher market. Monopolistic competition refers to a large number of independent sellers, each produces a differentiated product, each market has a low barrier to entry, and each producer faces a downward sloping demand curve.

honeycfa

Which one of the following structures is characterized by free entry and exit, a differentiated product, and price searcher behavior?

A) Oligopoly.

B) Pure competition.

C) Monopolistic competition.

---

Monopolistic competition is another name for competitive price-searcher markets. There are a large number of independent sellers, each produces a differentiated product, each market has a low barrier to entry, and each producer faces a downward sloping demand curve.

honeycfa

Which one of the following is NOT a characteristic of monopolistic competition?

A) Low barriers to entry and exit.

B) A single seller.

C) Differentiated products.

---

There are many sellers or producers who sell differentiated products that permit firms to attract customers without reducing price; and there are low barriers to entry.

honeycfa

Characteristics of monopolistic competition include all of the following EXCEPT:

A) large numbers of independent sellers.

B) differentiated products.

C) high barriers to entry.

---

Monopolistic competition has low barriers to entry.

honeycfa

An oligopolistic firm:

A) will consider the potential response of its rivals when making business decisions.

B) is likely to be formed when the minimum-cost output is only a small portion of the market output.

C) will seldom use product quality as a competitive weapon.

---

Oligopolists are highly dependent upon the actions of their rivals when making business decisions. Price determination in the auto industry is a good example. Automakers tend to play "follow the leader" and announce price increases in close synchronization. They are not working explicitly together, but the actions of one producer have a large impact on the others when products are differentiated, quality may be a competitive strategy.