State four characteristics of a monopoly.

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19. State four characteristics of a monopoly.

a) Single seller: There is only one firm producing the good or service.

b) No close substitutes: The product offered by the monopolist has no close substitutes.

c) High barriers to entry: Significant obstacles prevent new firms from entering the market.

d) Price maker: The monopolist has substantial control over the price of its product.

20. Highlight four characteristics of monopolistic competitive market.

a) Many sellers: There are a large number of firms in the market.

b) Differentiated products: Firms sell products that are similar but not identical, allowing for some market power.

c) Easy entry and exit: There are relatively low barriers for firms to enter or leave the market.

d) Non-price competition: Firms compete through advertising, branding, and product quality rather than just price.

21. State four circumstances in which a firm may acquire monopoly powers.

a) Control over essential resources: A firm owns or controls a critical input necessary for production.

b) Patents and copyrights: Legal protections grant exclusive rights to produce a good or use a process.

c) Government licenses or franchises: The government grants exclusive rights to a single firm to operate in a market.

d) Economies of scale (natural monopoly): A single firm can produce the entire market output at a lower cost than multiple firms.

22. Outline four features of oligopoly.

a) Few large firms: The market is dominated by a small number of large firms.

b) Interdependence: Firms' decisions significantly affect each other, leading to strategic behavior.

c) Homogeneous or differentiated products: Products can be identical (e.g., oil) or differentiated (e.g., automobiles).

d) High barriers to entry: Significant obstacles make it difficult for new firms to enter the market.

23. State four ways of determining prices of goods in oligopoly market structure.

a) Collusion/Cartels: Firms secretly agree to fix prices or output levels.

b) Price leadership: One dominant firm sets the price, and other firms follow.

c) Kinked demand curve: Firms are reluctant to raise prices (fearing loss of market share) or lower prices (fearing a price war).

d) Cost-plus pricing: Firms set prices by adding a markup to their average costs.

24. Identify the market structure described by each of the conditions given below.

$$\begin{array}{|c|c|c|} \hline & \text{Condition} & \text{Market structure} \\ \hline \text{(a)} & \text{The firm is the industry} & \text{Monopoly} \\ \hline \text{(b)} & \text{Buyers and sellers have complete knowledge about entire market but cannot influence the market} & \text{Perfect Competition} \\ \hline \text{(c)} & \text{Few large firms that dominate the market} & \text{Oligopoly} \\ \hline \text{(d)} & \text{Comprised of many sellers of differentiated products} & \text{Monopolistic Competition} \\ \hline \end{array}$$

25. Outline four difference between perfect competition and monopoly.

a) Number of firms: Perfect competition has many small firms, while monopoly has one single firm.

b) Product differentiation: Perfect competition features homogeneous products, while monopoly has a unique product with no close substitutes.

c) Barriers to entry: Perfect competition has no barriers to entry or exit, whereas monopoly has high barriers to entry.

d) Price control: Firms in perfect competition are price takers, having no control over price, while a monopolist is a price maker, having significant control over price.