Multiple choice

Which of the following factors conform the monopolistic market? A. Perfectly competitive market
(1) Price is set above marginal cost (2) Infinite number of competitors (3) Preserve excess profits (4) Absolute product differentiation (5) Price equals marginal cost (6) No competitor (7) Excess profit in the short term (8) Zero product differentiation

  1. 2, 5, 7, 8

  2. 1, 3, 4, 6

  3. 1, 2, 5, 6

  4. 3, 4, 5, 7
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Monopolistic markets are characterized by: (1) Price set above marginal cost, (3) Preservation of excess profits (barriers to entry), (4) Absolute product differentiation, and (6) No direct competitors (limited competition). This distinguishes monopolistic competition from perfect competition where price equals marginal cost and competitors are infinite.

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