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Firms and How They Operate
Quick questions on Monopolistic competition and oligopoly explained: H2 Economics
7short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is monopolistic competition?Show answer
Monopolistic competition combines features of both extremes:
What is oligopoly?Show answer
Oligopoly is a market dominated by a few large firms, with high barriers to entry and a high concentration ratio. Its defining feature is interdependence:
What is short run?Show answer
The firm maximises profit where and can earn supernormal profit if .
What is long run?Show answer
Easy entry means rivals enter to share any supernormal profit, taking demand away. Each firm's demand curve shifts left until it is tangent to the AC curve, where and only normal profit is earned. Because the demand curve slopes down, this tangency lies to the left of minimum AC, so the firm operates with excess capacity and is not productively efficient.
What is q1?Show answer
State two features of monopolistic competition. [2 marks]
What is q2?Show answer
Explain why prices may be rigid in an oligopoly. [3 marks]
What is q3?Show answer
Why is a cartel unstable? [2 marks]
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