What are the major characteristics of a firm competing under conditions of monopolistic competition?What are the major characteristics of a firm competing under conditions of oligopoly?Why does the movie theater charge matinee customers a lower price than the night time customers?Why is there an increased incentive for collusion among oligopoly firms?

Question
Asked Oct 15, 2019
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  1. What are the major characteristics of a firm competing under conditions of monopolistic competition?
  2. What are the major characteristics of a firm competing under conditions of oligopoly?
  3. Why does the movie theater charge matinee customers a lower price than the night time customers?
  4. Why is there an increased incentive for collusion among oligopoly firms?
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Expert Answer

Step 1

1.

The monopolistic competition is the market condition in which there are many producers and they sells the differentiated products in the market which means that the products will not be the perfect substitutes for each others. The main characteristics of the monopolistic competition are as follows:

  1. There are a large number of firms in the market which indicates that the barriers to entry and exit are not present. Since there are no tight barriers to entry or exit from the market, the competition amongst the competitors will be higher.
  2. The products in the monopolistic competition would be differentiated and hence the products will not be perfect substitutes for each other in the market.
  3. Since the products are not perfect substitutes for each other, there will be a little market control to each seller. Thus, unlike the perfect competition, there will be a smaller share of market control to each seller.
Step 2

2.

 

The oligopoly market is a market structure which is characterized by the presence of a small number of sellers sharing the entire market between them. Thus, the characteristics of the oligopoly market can be summarized as follows:

  1. There will be only few firms in the market. Since the number of players is less, there will be less competition between the firms.
  1. The products sold by each seller may be homogeneous or differentiated.
  2. There will be strict barriers to entry into the market which means the entry by a new firm into the market will be very tedious process.
  3. Since there are only a few firms with higher market controls, the firms would be tend to form cartels or collude with each other to form the monopoly power in the market which helps them to earn supernormal profits.
  4. The Price and quantity decisions of the firm under the oligopoly are decided by firms in the market which means that the decisions of the rivals are very important under the oligopoly market.
Step 3

3.

The movie theaters usually charges a lower price for their matinee viewers compared to the night time viewers. This is because during day time, especially during the time of the matinee show, the number of viewers for films will be less. This is because during that time unless in...

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