Answer:
Explanation:
Pure monopoly: one firm; unique product: with no close substitutes; much control over price:
price maker; entry is blocked; mostly public relations advertising.
Monopolistic competition: many firms; differentiated products; some control over price in a
narrow range; relatively easy entry; much nonprice competition: advertising, trademarks, brand
names.
Oligopoly: few firms; standardized or differentiated products; control over price circumscribed by
mutual interdependence: much collusion; many obstacles to entry; much nonprice competition,
particularly product differentiation.
(a) Hometown supermarket: oligopoly. Supermarkets are few in number in any one area; their
size makes new entry very difficult; there is much nonprice competition. However, there is
much price competition as they compete for market share, and there seems to be no collusion.
In this regard, the supermarket acts more like a monopolistic competitor. Note that this
answer may vary by area. Some areas could be characterized by monopolistic competition
while isolated small towns may have a monopoly situation.
(b) Steel industry: oligopoly within the domestic production market. Firms are few in number;
their products are standardized to some extent; their size makes new entry very difficult; there
is much nonprice competition; there is little, if any, price competition; while there may be no
collusion, there does seem to be much price leadership.
(c) Kansas wheat farm: pure competition. There are a great number of similar farms; the product
is standardized; there is no control over price; there is no nonprice competition. However,
entry is difficult because of the cost of acquiring land from a present proprietor. Of course,
government programs to assist agriculture complicate the purity of this example.
(d) Commercial bank: monopolistic competition. There are many similar banks; the services are
differentiated as much as the bank can make them appear to be; there is control over price
(mostly interest charged or offered) within a narrow range; entry is relatively easy (maybe too
easy!); there is much advertising. Once again, not every bank may fit this modelâsmaller
towns may have an oligopoly or monopoly situation.
(e) Automobile industry: oligopoly. There are the Big Three automakers, so they are few in
number; their products are differentiated; their size makes new entry very difficult; there is
much nonprice competition; there is little true price competition; while there does not appear
to be any collusion, there has been much price leadership. However, imports have made the
industry more competitive in the past two decades, which has substantially reduced the
market power of the U.S. automakers.
