CA Foundation Exam > CA Foundation Questions > Monopolistic Competitive firms ______.a)Are s...
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Monopolistic Competitive firms ______.
- a)Are small in size
- b)Have small share in total market
- c)Are very large in size
- d)Both (A) and (B)
Correct answer is option 'D'. Can you explain this answer?
Verified Answer
Monopolistic Competitive firms ______.a)Are small in sizeb)Have small ...
A monopolistic competitive industry has the following features:
Many firms.
Freedom of entry and exit.
Firms produce differentiated products.
Firms have price inelastic demand; they are price makers because the good is highly differentiated
Firms make normal profits in the long run but could make supernormal profits in the short term
Firms are allocatively and productively inefficient.
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Monopolistic Competitive firms ______.a)Are small in sizeb)Have small ...
Monopolistic competition is a market structure which combines elements of monopoly and competitive markets. Essentially a monopolistic competitive market is one with freedom of entry and exit, but firms can differentiate their products. Therefore, they have an inelastic demand curve and so they can set prices. However, because there is freedom of entry, supernormal profits will encourage more firms to enter the market leading to normal profits in the long term.
A monopolistic competitive industry has the following features:
Many firms.
Freedom of entry and exit.
Firms produce differentiated products.
Firms have price inelastic demand; they are price makers because the good is highly differentiated
Firms make normal profits in the long run but could make supernormal profits in the short term
Firms are allocatively and productively inefficient.
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Monopolistic Competitive firms ______.a)Are small in sizeb)Have small ...
Monopolistic Competitive firms are characterized by the presence of many firms in the market, each producing slightly differentiated products. These firms have some degree of market power, allowing them to set prices to a certain extent. In this type of market structure, firms are neither perfectly competitive nor monopolies, but rather fall somewhere in between.
a) Monopolistic Competitive firms are small in size:
One characteristic of monopolistic competitive firms is that they tend to be small in size compared to other market structures. This is because the presence of many firms in the market leads to a fragmentation of market share. Each firm has a relatively small market share, which limits their ability to exert significant market power. As a result, these firms typically have limited economies of scale and operate on a smaller scale compared to monopolies or oligopolies.
b) Monopolistic Competitive firms have a small share in the total market:
In a monopolistic competitive market, each firm produces slightly differentiated products, which means that they offer products that are similar but not identical to those of their competitors. This differentiation allows firms to capture a specific segment of the market, but their market share is limited due to competition from other firms offering similar products. As a result, no single firm has a dominant position in the market, and each firm's share in the total market is relatively small compared to monopolies or oligopolies.
c) Monopolistic Competitive firms are not very large in size:
Given the characteristics of monopolistic competitive markets, such as product differentiation and limited market power, firms in this market structure are not very large in size. They do not have the same level of dominance or control over the market as monopolies or oligopolies. Instead, they operate on a smaller scale, focusing on capturing a specific segment of the market rather than controlling the entire market.
d) Both (A) and (B) are correct:
Based on the explanations above, it is clear that both statements (A) and (B) are correct. Monopolistic competitive firms are small in size and have a small share in the total market due to the presence of many firms offering slightly differentiated products.
a) Monopolistic Competitive firms are small in size:
One characteristic of monopolistic competitive firms is that they tend to be small in size compared to other market structures. This is because the presence of many firms in the market leads to a fragmentation of market share. Each firm has a relatively small market share, which limits their ability to exert significant market power. As a result, these firms typically have limited economies of scale and operate on a smaller scale compared to monopolies or oligopolies.
b) Monopolistic Competitive firms have a small share in the total market:
In a monopolistic competitive market, each firm produces slightly differentiated products, which means that they offer products that are similar but not identical to those of their competitors. This differentiation allows firms to capture a specific segment of the market, but their market share is limited due to competition from other firms offering similar products. As a result, no single firm has a dominant position in the market, and each firm's share in the total market is relatively small compared to monopolies or oligopolies.
c) Monopolistic Competitive firms are not very large in size:
Given the characteristics of monopolistic competitive markets, such as product differentiation and limited market power, firms in this market structure are not very large in size. They do not have the same level of dominance or control over the market as monopolies or oligopolies. Instead, they operate on a smaller scale, focusing on capturing a specific segment of the market rather than controlling the entire market.
d) Both (A) and (B) are correct:
Based on the explanations above, it is clear that both statements (A) and (B) are correct. Monopolistic competitive firms are small in size and have a small share in the total market due to the presence of many firms offering slightly differentiated products.
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Monopolistic Competitive firms ______.a)Are small in sizeb)Have small share in total marketc)Are very large in sized)Both (A) and (B)Correct answer is option 'D'. Can you explain this answer?
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