A market is contestable if
a. the number of firms is larger than oligopoly.
b. firms spend a lot on advertising.
c. there is free entry and exit.
d. firms have kinked demand curves.
c
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If the cross elasticity of demand is -5 between french fries and orange drink, then french fries
A) and orange drink are complements. B) and orange drink are substitutes. C) are a normal good and orange drink is an inferior good. D) are an inferior good and orange drink is a normal good.
In a monopolistically competitive market, having a large number of firms in the market means that
A) no firm attempts to take into account the reaction of rival firms. B) individual firms will have a large portion of the market giving them monopoly power. C) firms will get together and collude because this will be the only way to earn monopoly profits. D) firms will cooperate with each other to drive competitors out of the market.