Understanding Market Structures

What is one of the key characteristics of a monopoly?

• Multiple sellers in the market

• Low barriers to entry

• High barriers to entry

• Availability of many close substitutes

In a monopolistic competition, how do firms differentiate their products?

• All firms sell identical products with no variations.

• Firms compete on price.

• Firms differentiate their products through branding, unique features, quality variations, customer service, and advertising.

• Firms rely solely on government regulations to differentiate their products.

Describe the main feature of an oligopoly market structure.

• There is potential for collusion.

• Products are identical with no differentiation.

• Many small firms dominate the market.

• No barriers to entry exist.

How does price-setting differ in a monopoly compared to perfect competition?

• In a monopoly, prices are set equal to marginal cost; in perfect competition, firms can influence prices.

• In a monopoly, firms are price takers and prices equal marginal cost; in perfect competition, firms set prices above marginal cost.

• In a monopoly, the firm sets prices above marginal cost; in perfect competition, firms are price takers and prices equal marginal cost.

• Both monopoly and perfect competition set prices below marginal cost.

Provide an example of a monopolistic competition in the Philippines.

• Fast food industry (e.g., Jollibee, McDonald's) in the Philippines.

• Real estate market (e.g., Ayala Land, SM Development)

• Telecommunications industry (e.g., Globe, Smart)

• Automobile industry (e.g., Toyota, Mitsubishi)

What is the significance of barriers to entry in an oligopoly?

• Barriers to entry help maintain market power and reduce competition in an oligopoly.

• Barriers to entry are only relevant in perfect competition.

• Barriers to entry increase competition in an oligopoly.

• Barriers to entry have no impact on market dynamics.

How do firms in a monopoly maximize their profits?

• By producing at the point where total revenue is maximized regardless of costs.

• By lowering prices to increase demand and reduce costs.

• By competing with other firms to lower prices and increase market share.

• By setting prices above marginal cost and producing where marginal revenue equals marginal cost.

What role does advertising play in monopolistic competition?

• Advertising reduces competition by increasing prices.

• Advertising has no impact on consumer preferences.

• Advertising is only used in perfect competition.

• Advertising helps differentiate products and build brand loyalty in monopolistic competition.

Identify a market in the Philippines that operates as a monopoly.

• Philippine Airlines

• Globe Telecom

• Meralco Electric Company

• Maynilad Water Services, Inc.

Explain how collusion can occur in an oligopoly.

• Secretly agreeing on prices through direct communication.

• Silently understanding each other's moves and acting similarly without talking.

• Using legal contracts to force agreement on production and prices.

• Publicly announcing price changes, allowing others to follow suit.