Question
Which one of the following is incorrect combination with regard to the types of market structures ?
The correct answer is
| Market Structure | No. of firms and degree of product differentiation | Control over price |
|---|---|---|
| Monopoly | Single firm with close substitute | Some |
To determine the incorrect combination among the given market structures, let's analyze each option with respect to the characteristics of market structures:
- Perfect Competition: In a perfectly competitive market, there are a large number of firms producing homogeneous products, meaning no product differentiation, and firms have no control over the price. This combination is correct.
| Market Structure | No. of firms and degree of product differentiation | Control over price |
|---|---|---|
| Perfect competition | Large number of firms with homogeneous products | None |
- Monopolistic Competition: This type of market structure includes many firms with products that are differentiated, either real or perceived. Firms have some control over pricing due to differentiation. This combination is correct.
| Market Structure | No. of firms and degree of product differentiation | Control over price |
|---|---|---|
| Monopolistic Competition | Many firms with real or perceived product differentiation | Some |
- Oligopoly: Typically, an oligopoly consists of a few firms which may offer similar or differentiated products, and there is significant control over price due to the limited number of firms. The description given—"little or no product differentiation and many firms"—is incorrect, as oligopolies do not have many firms like a competitive market does, and there is usually some level of product differentiation or at least strategic interaction among the firms. Thus, this option is incorrect.
| Market Structure | No. of firms and degree of product differentiation | Control over price |
|---|---|---|
| Oligopoly | Little or no product differentiation and many firms | Some |
- Monopoly: A monopoly is characterized by a single firm that has a unique product with no close substitutes. This firm has significant control over pricing. The statement claiming a monopoly has a "single firm with close substitutes" is incorrect, as monopolies do not have close substitutes.
| Market Structure | No. of firms and degree of product differentiation | Control over price |
|---|---|---|
| Monopoly | Single firm with close substitute | Some |
Conclusion:
Based on the above analysis, both the descriptions for Oligopoly and Monopoly contain incorrect combinations. However, according to the given question, the provided correct answer is the incorrect description of Monopoly.
Was this answer helpful?
Important Questions from Price determination under different market forms
- Consider the following factors :
I. Free entry
II. Advertising
III. Goal of satisfactory profits
Which of these are part of Chamberlin's Monopolistic Competition ?
Codes : - Which among the following is not a characteristic of Imperfect Competition ?
- In which of the following market situations/forms, firms are able to maximise profits ?
- An industry whose long run supply curve is horizontal is called
- Advertisement is common in which of the following markets ?
(i) Oligopoly
(ii) Perfect Competition
(iii) Monopolistic Competition
(iv) Monopoly
Choose from the codes below :
Need Expert Advice?
