Question

1. The best example of a monopolistically competitive industry is: _______.

A. tomato producers
B. car manufacturing
C. oill
D. local gas and electric utilities
E. retail clothing

2. A feature of monopolistic competition is: ___________.
A. a small number of buyers and sellers.
B. homogeneous or standardized products.
C. nonprice competition.
D. considerable control over price.

3. The characteristic most closely associated with oligopoly is: _______.
A. zero profits.
B. easy entry into the industry.
C. no control over price.
D. a few large producers.

Answer 1

Monopolistically competitive industries are characterized by many firms offering differentiated products with some control over pricing, not by homogeneous products, zero profits, no control over price, or only a few large producers. Firms can earn profits and exhibit a degree of market power.

Step-by-step explanation:

The best example of a monopolistically competitive industry is not homogeneous or standardized products (B), zero profits (A), no control over price (C), or a few large producers (D). Instead, a monopolistically competitive market is characterized by a large number of firms selling differentiated products. These firms have some control over their pricing, and the products are not perfect substitutes for each other. This allows firms to have a degree of market power which differentiates it from perfect competition.

Over time, firms in a monopolistically competitive market can earn profits; however, in the long run, the entry of new competitors can erode these profits leading to a normal profit equilibrium. The differentiated nature of their products is critical because it provides the unique features for which consumers may show a preference and, hence, allows the firms to maintain some control over the price.