ECO561 Week 3 …FREE…Quiz with Answers… ** I see a lot of views , but no comments : ( Roguephoenix FaceB**K PLEASE COMMENT TO LET ME KNOW THAT THIS IS HELPING MY FELLOW PHOENIX. 1. A purely- or perfectly-competitive firm would be characterized by which of the following? Hint : The different types of firms include pure competition, pure monopoly, monopolistic competition, and oligopoly. A. Large number of firms, price taker, free entry and exit, and standardized product B. Large number of firms, price maker, free entry and exit, and a differentiated product C. Small number of firms, price maker, limited entry and exit, and a standardized product D. One firm, price maker, limited entry and exit, and a…show more content… Hint X Oligopoly is the only market structure in which firms actively watch the behavior of other firms. A. Total independence of action-reaction B. Interdependence: what one firm does—in setting prices, determining production levels, investing in R & D, and so forth—can significantly affect other firms' competitive positions. C. Despite the relatively small number of oligopoly firms, the action(s) of any one firm have little direct effect on the decisions of its competitors. D. The common practice of collusive price-setting. By definition, an oligopolistic industry has a small number of firms. This means that there are only a few providers of the good, whether it is identical or slightly differentiated, for consumers to move to if a firm changes prices or the product design. If Firm A lowers its price—assuming it is providing a product very similar or identical to products of the other firms in the market—many customers will purchase the product from Firm A rather than from the previous provider. As customers move, the revenues of the other firms decrease, which results in a reaction to prevent further decreases. To prevent losses, the firms follow each other in pricing decisions, which also is true in other areas. While it is true that some firms in oligopoly market structures may act collusively in setting prices, this practice is illegal in many countries. Even in places where it is not prevented, it is not common
