ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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few dominant firms and low entry barriers
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a large number of firms and substantial entry barriers
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a large number of firms and low entry barriers
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few dominant firms and substantial entry barriers
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Detailed explanation-1: -Monopolistic competition is the one in which there are large number of producers selling dissimilar products. There is also no entry barriers for the new firms. Hence, a monopolistically competitive market is characterized by all of the following except economic profit in the long run.
Detailed explanation-2: -Monopolistic competition exists when many companies offer competing products or services that are similar, but not perfect, substitutes. The barriers to entry in a monopolistic competitive industry are low, and the decisions of any one firm do not directly affect its competitors.
Detailed explanation-3: -Monopolistic Competition = A market structure characterized by a differentiated product and freedom of entry and exit.
Detailed explanation-4: -These barriers include: economies of scale that lead to natural monopoly; control of a physical resource; legal restrictions on competition; patent, trademark and copyright protection; and practices to intimidate the competition like predatory pricing.
Detailed explanation-5: -A pure monopoly is a single seller in a market or sector with high barriers to entry such as significant startup costs whose product has no substitutes.