1)The ability for a monopoly firm to increase its price depends mainly on:

A. the number of firms in the industry.

B. the more price elastic its goods/service is.

C. the less elastic its goods/services.

Explain your answer.

2)What are two types of oligopoly?

1)

• The ability for a monopoly firm to increase its price depends mainly on C. the less elastic its goods/services.

In order to increase its revenue, a monopolist has to increase its price. But, if it increases its price, the demand for its goods and services declines, and the revenue decline as well. So, the ability to increase price mainly depends on the price elasticity of demand. The lesser the elasticity of its goods and services, the lesser the price effect on demand, the more price can be increased by a monopolist.

2)

There are specific characteristics that make a market be identified as an oligopoly market. Some of these characteristics include; few firms in the market, presence of non-price competition as firms are keen when it comes to pricing to avoid price wars and barriers to entry.

The two types of oligopoly include;

Perfect (pure) oligopoly

An oligopoly market is said to be pure if all the firms in the market produce homogeneous products. An example of such a situation occurs in the production of cement.

Differentiated (imperfect) oligopoly

In a differentiated or imperfect oligopoly, the firms produce different types of products. An example can be sited when it comes to the production of soft drinks.