Question

1) The market structure which is characterized by a high degree of interdependence between sellers is known as a monopoly.

a. True

b. False

2) Monopolistic competition is characterized by few sellers, selling identical products with zero or very low barriers to entry.

a. true

b. false

3) If the consumption of a product creates external benefits it should be subsidized in order to encourage its purchase.

a. true

b. false

Answer 1

1. False.

• A monopoly is a market structure consisting of a single firm that enjoys all the market power.
• It has high barriers of entry which prevents other firm's from entering into the Industry.
• Therefore, it does not have any interdependence between the seller's.

2. False.

• A monopolistically competitive market is characterized by large number of seller's and buyers selling differentiated products.
• Under this market, the barriers to entry and exit are low or are nearly zero.
• The firm's are considered as price maker's as they set their own price's for their goods and services.

3. True.

• If the consumption of any product creates external benefits to thrid parties the government should provide subsidies to encourage it's consumption.
• For example :- Use of bicycles should be subsidized so that more people will be encouraged to use them. This will decrease the level of pollution and hence benefit the other people of the society.