Economics - Economics Section 1
11. In which of the following cases is collusion most likely to occur?
- Option : C
- Explanation : Even though there are only four firms in the industry, the barriers to entry are low. This implies that other firms are voluntarily not entering the industry, making this most likely a perfectly competitive environment.
- Option : B
- Explanation : There are many competitors in the market, but there is evidence of branding and product differentiation. These are characteristics of monopolistic competition.
- Option : B
- Explanation : Product differentiation is the most distinctive factor in monopolistic competition.
- Option : B
- Explanation : Oligopoly markets are characterized by a small number of firms that dominate the market. There are so few firms in the relevant market that their pricing decisions are interdependent.
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