Question

A group of teens in your town meet and agree to charge a flat fee of five dollars per hour for babysitting. They charge the same rate no matter how many children there are, or when the service is needed. Then they divide areas of town on a map between them, agreeing to only serve customers within their respective areas. Within weeks they have gained most of the business in town, driving out other teens that cannot lower their rates. The babysitting market in your town has become __________.A. A monopoly

B. An oligopoly
C. Purely competitive
D. Monopolistically competitive

Answer 1

B) An oligopoly

Step-by-step explanation:

Oligopolies are a type of imperfect competition where only a few suppliers exist and each of them possesses a large supplier power.

In this case, to add insult to injury, the few suppliers decided to collude in order to limit competition even further and impose barriers entries. Collusion means that firms that should generally compete against each other, secretly decide to work together to hurt their competitors.

Answer 2

B. An oligopoly

Step-by-step explanation:

An oligopoly is characterised by a few firms operating in an industry. The babysitters came together to set price in collusion. Collusion is a characteristic of an oligopoly.

Also the babysitters set the market price for their goods. This is a characteristic of an oligopoly.

A purely competitive industry is when there are many buyers and sellers of homogenous goods and services. Firms are price takers. They have no influence over the market price. Price is set by the forces of demand and supply.

A monopoly is when there is only one firm operating in an industry.

A monopolistic competition is when there are many buyers and sellers of differentiated goods. Firms set the market price of their good.

I hope my answer helps you