Knapp7 - WEEK7

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WEEK 7 CH14, Q1 –   Which of the following industries would you classify as an oligopoly? Which  would you classify as monopolistically competitive? Explain your answer. If you are not  sure, what information do you need to know to decide?  a.  Athletic.  The industry for athletic shoes could be monopolistically competitive if there  are many firms with limited market power facing easy entry of new firms. However, the  industry could also be an oligopoly if there are instead only a few firms with substantial  market power facing limited entry of new firms. b.  Restaurants.  This industry is monopolistically competitive with many firms selling a  differentiated product.  Furthermore, these firms have market power such that they can  set the price of their own product, although they face potential entry of new firms. c.  Watches.  Either monopolistically competitive or an oligopoly depending on the  number of firms, market power, and potential entry. d.  Aircraft.  The aircraft industry is an oligopoly because there are only a few firms that  produce a differentiated product and behave strategically as they set price.   
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Knapp7 - WEEK7

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