Question

Each statement describes one of the major market models or industry structures (pure competition, pure monopoly, oligopoly, or monopolistic competition) . Provide the market model or industry structure each description best fits

1.Market structure in which collusion is most likely to take place.

2. McDonald's or Burger King would be found here.

TRUE OR FALSE

1. Generally speaking, the larger the number of firms in an oligopolistic industry, the more difficult it is for those firms to collude.

2. Marginal utility is simply the additional utility or satisfaction derived from the consumption of one more good.

3. The more elastic the demand for a product, the more elastic will be the demand for the resources employed in producing that product.

4. Where economies of scale occur over a wide range of output, larger firms will be more efficient producers than smaller firms.

Answer 1

1. Collusion is most likely to take place in Oligopoly.

2. McDonald and Burger King are found in Monopolistic competition.

True or False

1. True the larger the number of firms in an oligopolistic industry, the more difficult it is for those firms to collude. It is because a large number of firms may have several difficulties such as there may be a threat of defection. A firm may agree to collude and then break the agreement, undercutting the profits of the firms still holding to the agreement. So the coordination becomes spurious with larger number of participant, hence it is difficult to collude.

2. True Marginal utility is defined as the additional satisfaction attains with the consumption of one more unit. So it is a true statement.

3. True If the resource is non-substitutable then it implies more the elasticity of products more will be the elasticity of resource.

4. True. economies of scale occur when production cost decreases and production output increases. Since large firms have more buying power and are have the advantage in resource capacity.