Question

Write True or False for each question. If you say False for any statement, you must explain clearly your reason for answering False in order to receive credit.

a) One characteristic of a Monopolistic Competitive Market is that one seller serves the entire market.

b) A firm in a Monopolistic Competitive Market has no power over its on price.

c) If a large numbers of firms are competing, then the market could be perfect competition or monopolistic competition.

d) Monopolies can make their customers pay any price the Monopolies want.

e) The only way for a firm in a Monopolistic Competitive Market to increase its sales is to lower its price.

f) Since Monopolies have no competition, they will not pay for advertising.

g) If there are four firms in an industry with the market shares of 50%, 40%, 5% and 5%, the Herfindahl-Hirschman Index is 4000.

h) Product Differentiation provides no benefit to society.

Answer 1

a) FALSE
One characteristic of a Monopoly Market is that one seller serves the entire market.
b)FALSE
A firm in a Perfect Competitive Market has no power over it's on price.
c)TRUE
If large numbers of firms are competing, then the market could be perfect competition or monopolistic competition.
d) FALSE
Monopolies cannot make their customers pay any price that they want.Although they have a great degree of market power yet they also face a downward sloping demand curve.Also, they produce where MC=MR.
e) FALSE
A Monopolistic Competitive Market can increase its sales by also advertising.