Multiple Choice QuestionEntry of new firms into monopolistically competitive industries is relatively easy because Blank______.Multiple choice question.existing firms experience economies of scaleadvertising is not requiredcapital requirements are lowcompetitors are large firmsproduct development is unnecessary
Question
Multiple Choice QuestionEntry of new firms into monopolistically competitive industries is relatively easy because Blank______.Multiple choice question.existing firms experience economies of scaleadvertising is not requiredcapital requirements are lowcompetitors are large firmsproduct development is unnecessary
Solution
The entry of new firms into monopolistically competitive industries is relatively easy because "capital requirements are low".
Here's why:
In a monopolistically competitive market, there are many firms selling differentiated products. This means that each firm has a certain degree of market power to set their own prices.
The key feature of this market structure is that there are low barriers to entry and exit. This is primarily due to low capital requirements. New firms can enter the market without needing a large amount of initial investment.
On the other hand, options like "existing firms experience economies of scale" or "competitors are large firms" would suggest high barriers to entry, which is not characteristic of monopolistically competitive markets.
"Advertising is not required" and "product development is unnecessary" are also incorrect because in a monopolistically competitive market, firms often rely on advertising and product differentiation to attract customers.
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Multiple Choice QuestionCompared with oligopoly and monopoly, entry of new firms into monopolistically competitive industries isMultiple choice question.relatively difficult because average costs are high.relatively easy because firms need to develop differentiated products.relatively difficult because capital requirements are high.relatively easy because firms do not need to advertise.relatively easy because economies of scale are few.
Multiple Choice QuestionEntry to and exit from monopolistically competitive industries is Blank______.Multiple choice question.relatively easyrelatively difficultimpossibleundesirablecostless
Multiple Choice QuestionMonopolists use economies of scale to block the entry of new firms into an industry by Blank______.Multiple choice question.lowering prices so that another firm cannot competedeveloping innovative technologies that make it difficult for another firm to competeproducing a surplus of goods and flooding the marketraising prices because a monopolist's cost per unit is very high
Multiple Choice QuestionEntry into monopolistically competitive industries isMultiple choice question.difficult compared to oligopoly.easy compared to pure competition.difficult compared to pure monopoly.easy compared to oligopoly.
Multiple Choice QuestionDemand for monopolistically competitive firms is Blank______.Multiple choice question.more inelastic than demand for pure monopolies due to the presence of rival firmsmore elastic than demand for firms in pure competition due to product homogeneityless elastic than demand for pure monopolies due to competitors producing substitutable goodsless elastic than demand for firms in pure competition due to fewer rivals and relative product differentiation
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