During certain periods in the past few decades, if one of the three major breakf

Question

During certain periods in the past few decades, if one of the three major breakfast cereal producers in the United States announced a price increase, the other two announced a similar price increase. This implies that the market for breakfast cereals is a good example of the price-leadership model of oligopoly monopolistic competition a pure monopoly. a cartel. Differentiate between perfect competition and an oligopoly? Firms in an oligopoly earn economic profit in the long run, whereas firms in perfectly competitive market earn zero economic profit in the long run. Firms in an oligopoly face horizontal demand curves, whereas firms in a perfectly competitive market face downward-sloping demand curves. Firms in an oligopoly charge a lower price than firms in a perfectly competitive market. An oligopoly is characterized with low barriers to entry, whereas a perfectly competitive market is characterized with high barriers to entry.

Explanation / Answer

Sol:- D. a Cartel

Definition:- In economics, a cartel is an agreement between competing firms to control prices or exclude entry of a new competitor in a market. It is a formal organization of sellers or buyers that agree to fix selling prices, purchase prices, or reduce production using a variety of tactics.[1] Cartels usually arise in an oligopolistic industry, where the number of sellers is small or sales are highly concentrated and the products being traded are usually commodities. Cartel members may agree on such matters as setting minimum or target prices (price fixing), reducing total industry output, fixing market shares, allocating customers, allocating territories, bid rigging, establishment of common sales agencies, altering the conditions of sale, or combination of these. The aim of such collusion (also called the cartel agreement) is to increase individual members' profits by reducing competition. If the cartelists do not agree on market shares, they must have a plan to share the extra monopoly profits generated by the cartel.

2. Sol:- A

Monopolistic competition describes a market that has a lot of buyers and sellers, but whose firms sell vastly different products. Therefore, the condition of perfect competition that products must be identical from firm to firm is not met.

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