Question:
What is meant by prices being rigid? How can oligopoly behaviour lead to such an outcome?
Answer:
- Price rigidity refers to a situation in which whether there is change in demand and supply, the price tends to stay fixed.
- In an oligopolistic market firms . are in a position to influence the prices.
- However, they stick to their prices in order to avoid a price war. If a firm tries to reduce the price the rivals will also react by reducing their prices. So, it will be of no benefit.
- Likewise, if a firm tries to raise the price other firms will not do so. As a result, the firm which intended to raise the price will lose its customers. So, oligopoly behaviour leads to price rigidity in an oligopolistic market.
Non-Competitive Markets
Q 1.
What is the importance of monopoly?
Q 2.
What is a price-maker firm?
Q 3.
Which features of monopolistic competition are competitive in nature?
Q 4.
Under monopoly a firm sells the goods at a single price.
Q 5.
Under which market form, firm is a price-maker?
Q 6.
Why AR curve (demand curve) under monopolistic competition is more elastic than AR curve under monopoly?
Q 7.
Under oligopoly, there are large number of buyers and sellers.
Q 8.
How many firms are there in a monopoly market?
Q 9.
Which features of monopolistic competition are monopolistic in nature?
Q 10.
Why is the demand curve under monopoly less elastic as compared to the demand curve under monopolistic competition?
Q 11.
Under monopolistic competition there is only one seller of the product.
Q 12.
What is the value of MR when the demand curve is elastic?
Q 13.
Explain the main features of barriers to the entry of firms.
Q 14.
Demand curve facing a monopoly firm is a constraint for the monopolist."Comment.
Q 15.
What are the shapes of AR and MR curves under monopoly?
Q 16.
Define product differentiation.
Q 17.
Because of product differentiation under monopolistic competition, price tends to be higher than what it ought to have been in real terms and hence consumers suffer. How?
Q 18.
List the three different ways in which oligopoly firms may behave.
Q 19.
What is the reason for the long run equilibrium of a firm in monopolistic competition to be associated with zero profit?
Q 20.
Giving reasons, state whether the following statements are true or false.
Under monopoly all firms can sell at any price.
Q 21.
Price discrimination should be socially desirable. How?
Q 22.
What does Monopolistic Competition mean?
Q 23.
Under monopoly new firms can enter the industry to raise the supply.
Q 24.
Give reasons for the following statements:
- A perfectly competitive firm is a price-taker.
- Product differentiation is a characteristic feature of a monopolistic competitive market,
- A monopolist cannot fix both the quantity that he likes to produce and the price at which he would like to sell.
Q 25.
Under oligopoly though firms are free to take decisions about price and quantity to be sold but they do not change the price and hence buyers are deprived of the benefit of fall in price. Comment.
Q 26.
In monopoly, firm is different from industry.
Q 27.
How to reduce the incidence of selling cost under monopolistic competition because of which price tends to be higher than what it would have been if production cost would have been the sole basis?
Q 28.
In spite of having monopoly why the Indian Railways has not increased the fare for many years?
Q 29.
How the efficiency may increase if two firms merge?
Q 30.
Give reasons for the following statements:
- Demand curve facing a perfectly competitive firm is a horizontal straight line.
- Demand curve facing a monopolistic competitive firm is a downward sloping curve.
- Demand curve facing a monopoly firm is less elastic than that curve facing a monopolistic competitive firm.
Q 31.
Explain the implication of the following: The feature of no close substitutes' under monopoly.
Q 32.
Compare between perfect competition and monopoly.
Q 33.
Under monopolistic competition, all the customers have perfect knowledge of the market conditions.
Q 34.
Although there are few (more than one) firms in oligopoly. Even these firms can enjoy monopoly power. How?
Q 35.
What is meant by prices being rigid? How can oligopoly behaviour lead to such an outcome?
Q 36.
Under monopolistic competition, a firm faces a perfectly elastic demand curve.
Q 37.
"A day without selling costs is nearly impossible". Comment.
Q 38.
Explain the feature of few firms in an oligopoly market.
Q 39.
What do you mean by duopoly?
Q 40.
In which form of market there is product differentiation?
Q 41.
Give the meaning of Oligopoly'.
Q 42.
If the firm in the toothpaste industry have the following market shares, which market structure would best describe the industiy? [1 Mark]
Q 43.
Suppose that the demand curve for the XYZ company slopes downward and to the right. Would you conclude that the firm is a price taker or a price maker? Give reasons.
Q 44.
Explain why the demand curve facing a firm under monopolistic competition is negatively sloped?
Q 45.
A monopolist can sell any quantity he likes at a price. Give reasons with true or false.
Q 46.
What is meant by price rigidity, under oligopoly.
Q 47.
Explain any two sources of restricted entry under monopoly.
Q 48.
Selling cost is a nail in the coffin of consumer's sovereignty. How?
Q 49.
Discuss the relationship between total revenue, average revenue and marginal revenue under perfect competition and monopolistic competition. Use diagrams.
Q 50.
Draw a demand curve in different market situation and also compare its elasticity of demand.
