Question

Question 1

1. A market structure in which there are many firms selling products that are similar but not identical is known as

   	a.	oligopoly.
   	b.	monopolistic competition.
   	c.	perfect competition.
   	d.	monopoly.

Question 2

1. If there are many firms participating in a market, the market is either

   	a.	an oligopoly or perfectly competitive.
   	b.	perfectly competitive or monopolistically competitive.
   	c.	an oligopoly or monopolistically competitive.
   	d.	an oligopoly or a cartel.

  

Question 3

1. A firm in a monopolistically competitive market faces a

   	a.	downward-sloping demand curve because there are only a few firms in the market.
   	b.	downward-sloping demand curve because the firm’s product is different from those offered by other firms.
   	c.	horizontal demand curve because firms can enter the market without restriction.
   	d.	horizontal demand curve because there are many firms in the market.

Answer 1

1.

A monopolistic firm is a maker and profit-maximizing condition is

MR=MC

Since a monopolistic firm is that form of market in which there is large number of buyers and sellers and firm sells differentiated product based on quality, size, shape etc, therefore product is not homogeneous. Since firm is price maker but firm does not compete on the price but they compete in the market based on size, quantity quality etc.

Hence it can be said that a market structure in which there are many firms selling products that are similar but not identical is known as monopolistic competition.

Hence option b is the correct answer.

2.

A monopolistic competitive firm

Since in the perfectly competitive firm, there are large number of buyers and sellers and they sell identical product and price is determined by industry and not by the firm. So any firm or any buyers can buy or sell any quantity of goods at the market price. It means there is no effect of the individual demand or supply of goods on the market price. It means production decisions cannot affect the market price.

A perfectly competitive firm

Since a monopolistic firm is that form of market in which there is large number of buyers and sellers and firm sells differentiated product based on quality, size, shape etc, therefore product is not homogeneous. Since firm is price maker but firm does not compete on the price but they compete in the market based on size, quantity quality etc.

Hence it can be said that if there are many firms participating in a market, the market is either perfectly competitive or monopolistically competitive.

Hence option b is the correct answer.

3.

A firm in a monopolistically competitive market faces a downward-sloping demand curve because the firm’s product is different from those offered by other firms.

Hence option b is the correct answer.