If a product such as cement or bricks is costly to ship and therefore markets are very localized the national concentration ratio for that industry: A will be greater than 50 percent. In a monopolistic competition situation, since there are only a few number of sellers, one larger seller controls the market, and therefore, has control over prices, quality and product features. B setting price and output collusively. Definition of Monopolistic Competition Monopolistic Competition refers to a type of market structure, where the number of sellers selling similar but not exactly identical products, is large. Under Monopoly there is no difference between firm and industry. B some firms will exit the industry.
Markets work best when consumers are well informed, and advertising provides that information. Another market structure model is oligopolistic competition. Information is shared about your use of this site with Google. Monopolistic competition tends to lead to heavy marketing, because different firms need to distinguish broadly similar products. Since barriers to entry in a monopolistic market are high, firms able to enter the market are still often dominated by one bigger firm. We can conclude that this industry is: A a pure monopoly.
Therefore, he can sell as much or as little of his output as he chooses at the current price. Kinked-demand curve model 157-176 9. In many markets there may be brief periods of pure competition. Lesson Summary Pure competition is a market condition where the companies providing products offer the same features and price, making the difference between manufacturers minor, if not completely irrelevant. D The greater the degree of product variation the greater is the excess capacity problem.
The difference is brought by branding, or in most cases, quality. D that price competition is stronger in Y than in X. All firms in monopolistic competition have the same, relatively low degree of ; they are all. In other words, demand is very responsive to price changes. However, they must always consider the actions of the other firms in the market when changing prices, because they are certain to respond in a way to neutralize any changes, so that they can maintain their market share. D monopolistically competitive producers use strategic pricing strategies to combat rivals. A monopolistically competitive industry combines elements of both competition and monopoly.
Motor vehicle industry makes up a monopolistic competition. B degree to which product price exceeds marginal cost in various industries. Product differentiation is the process of distinguishing a product or service from others to make it more attractive to a target market. Pure competition is an ideal economic scenario in which there are a large number of independent sellers and consumers, and the given product is in ready supply. All other variables being equal, the companies selling the gas are equally attractive to consumers and do not have an advantage over each other. C is in long-run equilibrium.
Oligopolies are created a number of ways, although noncompetitive practices, government mandates, or advanced technology are usually precursors. C this industry is a differentiated oligopoly. C a constant cost industry. For instance, suppliers of toothpaste may try to convince the public that their product makes teeth whiter or helps to prevent cavities or periodontal disease. Barriers to entry in oligopolistic industries may consist of: A diseconomies of scale. B the demand curve would become more elastic.
Most agricultural markets are good examples of pure competition. B shift to the left. C both industries entail the production of differentiated products. C overallocated because long-run equilibrium occurs where marginal cost exceeds price. An oligopoly market consists of a small number of firms that are relatively large firms which produce products that are similar but slightly different.
Non price competition In recognition of the fact that monopolist conduct solely the activities of the industry, non price actions are not necessary Davies, 2005. Also like a monopoly, a monopolistic competitive firm will maximize its profits by producing goods to the point where its marginal revenues equals its marginal costs. This market condition usually arises from , take-overs and acquisitions. The automobile household appliance and automobile tire industries are all illustrations of: A homogeneous oligopoly. B more difficult than under pure competition but not nearly as difficult as under pure monopoly. Also, since a monopolistic competitive firm has powers over the market that are similar to a monopoly, its profit maximizing level of production will result in a net loss of consumer and producer surplus, creating deadweight loss.
Some believe that advertising and branding induces customers to spend more on products because of the name associated with them rather than because of rational factors. An important similarity between a monopolistically competitive firm and a pure monopolist is that both: A realize an economic profit in the long run. The monopolistically competitive firm shown in the above figure: A is in long-run equilibrium. Oligopoly markets on the other hand, ensure competitive hence fair prices for the consumer. Causes of differentiation include functional aspects of the product or service, how it is distributed and marketed, and who buys it. Types of products The products available in a pure monopoly are distinctive in character because of the fact that the firm is the only producer or seller in a market. If a consumer goes into a grocery store, the supply of red delicious apples may come from multiple farms.
Furthermore, some firms are ready to enter the market in order to participate in selling the same products. Generic products, like balloons, can illustrate pure competition. This Kindle ebook has all the articles on microeconomics on this website as well as all of the images, but no ads, and you can read it offline on any device with the Kindle app. Second, the firm will only be able to break even in the long-run; it will not be able to earn an economic profit. The products being slightly different from each other remain close substitutes of each other and hence cannot be priced very differently from each other. D few dominant firms and substantial entry barriers. Be sure to include the words no spam in the subject.