Multiple Choice QuestionIn monopolistically competitive industriesMultiple choice question.competition is unlikely because there is a large number of firms.price fixing is unlikely because there is a small number of firms.restricting output is unlikely because there is a small number of firms.collusion is unlikely because there is a large number of firms.competition is unlikely because there is a small number of firms.Need help? Review these concept resources.
Question
Multiple Choice QuestionIn monopolistically competitive industriesMultiple choice question.competition is unlikely because there is a large number of firms.price fixing is unlikely because there is a small number of firms.restricting output is unlikely because there is a small number of firms.collusion is unlikely because there is a large number of firms.competition is unlikely because there is a small number of firms.Need help? Review these concept resources.
Solution
The correct answer is: "collusion is unlikely because there is a large number of firms."
In monopolistically competitive industries, there are many firms, each of which has a small market share. This makes collusion, or cooperative behavior to control prices or output, unlikely. Each firm is too small to affect market prices on its own, and coordinating behavior among a large number of firms is difficult. Therefore, each firm acts independently, making decisions about prices and output based on its own costs and demand, rather than through agreements with other firms.
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