When a market consists of a few large firms and barriers to entry exist, it:
A. must be monopolistically competitive.
B. is likely an oligopoly.
C. is likely a monopoly.
D. must be perfectly competitive.
Answer: B
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In a community where poor people do not associate with members of the opposite sex until they are 21 years old, the cost of hiring a babysitter on weekends will be
A) higher than in other communities. B) lower than in other communities. C) prohibitive. D) zero.
Refer to the diagram in which S is the market supply curve and S 1 is a supply curve comprising all costs of production, including external costs. Assume that the number of peopleaffected by these external costs is large. If the government wishes to
establish an optimal allocation of resources in this market, it should:
A. not intervene because the market outcome is optimal.
B. subsidize consumers so that the market demand curve shifts leftward.
C. subsidize producers so that the market supply curve shifts leftward (upward).
D. tax producers so that the market supply curve shifts leftward (upward).