Economics MCQ - Economics Section 1

11 In which of the following cases is collusion most likely to occur?

Collusion is more likely when companies have homogeneous products

12 An industry comprises of four firms that produce an easily replicable product. The barriers to entry are low. This industry is best characterized as:

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.

13 Indus Manufacturing is one of many companies in an industry. Indus produces widgets which are similar to those produced by its competitors up to the point they are labeled. The labeled brand sells for £3.50 per unit. Other firms in the industry sell their products for £2.50 per unit. This industry is best characterized as:

There are many competitors in the market, but there is evidence of branding and product differentiation. These are characteristics of monopolistic competition.

14 Acme Enterprises operates in an industry with many sellers who differentiate their products. This industry is best characterized as:

Product differentiation is the most distinctive factor in monopolistic competition.

15 Zain Enterprises operates in an industry, which is characterized by a few sellers of a homogeneous product. The pricing decisions of the firms in this industry are interdependent. This industry is best characterized as:

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.