Multiple Select QuestionSelect all that applyMonopolistic competition normally consists of 25 to 75 firms rather than hundreds or thousands and involves which of the following characteristics?Multiple select question.small market sharesindependent actionno collusionrestriction of outputstandardized products
Question
Multiple Select QuestionSelect all that applyMonopolistic competition normally consists of 25 to 75 firms rather than hundreds or thousands and involves which of the following characteristics?Multiple select question.small market sharesindependent actionno collusionrestriction of outputstandardized products
Solution
The characteristics of monopolistic competition normally consist of:
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Small market shares: In monopolistic competition, each firm controls a small portion of the market share and has a minimal impact on pricing.
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Independent action: Each firm operates independently and does not collaborate with other firms in the market. They make decisions about pricing and output based on their own situations, not on the basis of agreements with other firms.
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No collusion: Firms in a monopolistic competition market structure do not collude with each other. They do not form agreements to fix prices or output levels.
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Restriction of output: Firms in monopolistic competition can restrict output in order to raise prices and increase profits.
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Standardized products: This is not a characteristic of monopolistic competition. In fact, it's the opposite. In monopolistic competition, firms sell differentiated products, not standardized ones.
So, the correct answers are small market shares, independent action, no collusion, and restriction of output.
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