"One might expect firms in a monopolistically competitive market to experience greater swings in the price of their products over the business cycle than those in an oligopoly market. However, fluctuations in profits do not necessarily follow the same pattern." Discuss this statement.
Market Structure Concepts: Indicate whether each of the following statements is True or False and explain why.
1. Equilibrium in monopolistically competitive markets requires that firms be operating at the minimum point on the long-run average cost curve.
2. A high ratio of distribution cost to total cost tends to increase competition by widening the geographic area over which any individual producer can compete.
3. The price elasticity of demand tends to fall as new competitors introduce substitute products.
4. An efficiently functioning cartel achieves a monopoly price / output combination.
5. An increase in product differentiation tends to increase the slope of firm demand curves.
This question was asked on May 06, 2010.
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