17. Pure oligopoly differs from differentiated oligopoly in that: a. the product
ID: 1213001 • Letter: 1
Question
17. Pure oligopoly differs from differentiated oligopoly in that: a. the products of pure oligopolists tend to be similar. b. the pure oligopolist has greater power over price. c. pure oligopolist are more likely to advertise. d. entry into the product group is relatively easy for the pure oligopolist. e. only the pure oligopolist faces a downward-sloping demand curve.
18. Which of the following markets is the best example of differentiated oligopoly? a. steel b. cement c. automobiles d. electricity e. agriculture
19. Product differentiation gives the producer only a small amount of monopoly power because: a. there can be little or no substitution between product groups. b. the monopolistic competitor faces a downward-sloping demand curve. c. the presence of excess capacity gives the producer some freedom to vary output. d. the product may be unique but close substitutions are available. e. the industry is difficult to define and hence cannot be regulated.
20. The large number of firms in an monopolistically competitive market ensures that: a. there will be no room for new competitive entrants. b. all the firms will charge identical prices. c. products differentiation will disappear and output will become homogeneous. d. pricing and production actions by a single firm will not lead to retaliatory actions by rival firms.
21. Monopolistically competitive markets will tend to be characterized by: a. excessive economic profits in the long run. b. interdependence among sellers. c. overcrowding and excess capacity d. perfectly elastic demand curves e. homogeneous products.
22. From society’s viewpoint one benefit of monopolistically competitive market is the likelihood of: a. prices which are lower than in perfectly competitive markets. b. less advertising and product promotion outlays. c. significant economies of scale. d. no economic waste or inefficiencies e. greater product diversity.
Explanation / Answer
17. Pure oligopoly differs from differentiated oligopoly in that:
Answer (a). the products of pure oligopolists tend to be similar.
( the definition of pure oligopoly is that a few sellers sell homogeneous products to a large number of buyers)
18. Which of the following markets is the best example of differentiated oligopoly?
Answer: (c. automobiles
19. Product differentiation gives the producer only a small amount of monopoly power because: a. there can be little or no substitution between product groups.
Answer: (d). the product may be unique but close substitutions are available. Monopoly power depends on the elasticity of demand for the product. Non-price competition attempts to create brand-loyalties etc to reduce the elasticity. However, this gives control over price and output only to a small degree because of the substitution effect.
20. The large number of firms in a monopolistically competitive market ensures that:
Answer (d). pricing and production actions by a single firm will not lead to retaliatory actions by rival firms.
21. Monopolistically competitive markets will tend to be characterized by:
Answer (c. overcrowding and excess capacity: Monopolistic competition has features of monopoly and competition at the same time. Therefore every firm operates under less than optimal capacity as compared to perfect competition where all firms will produce at the maximum output possible, to get maximum revenue.
22. From society’s viewpoint one benefit of monopolistically competitive market is the likelihood of:
Answer (e). Greater product diversity. Each seller will attempt to position his product in such a way as to cater to a particular type of customer demand. In perfect competition the products are almost homogenous. In monopolistic competition each product, though serves the same need is different in some features that appeal to a particular segment in the market.
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