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| Question | Answer |
| What is the degree of BTE for Monopolistic Competition? | Low BTEs - New firms have the freedom to enter/leave industry |
| What is the degree of BTE for Oligopoly? | Significant BTEs 1. Natural -Substantial internal EOS - Control of raw materials - Imperfect info 2. Financial 3. Artificially created - Legal - Aggressive tactics - Trade |
| How many number of firms are there in a Monopolistic Competition? | Large number of firms - Each firm only producing an insignificant part of the total market - Independent behaviour |
| How many number of firms are there in an Oligopoly? | A few large firms - Controls significant portion of total output - High concentration ratio - Strong price-setting abilities |
| What type of product differentiation is in a Monopolistic Competition? | Close but identical substitutes - Price elastic - Differentiated (real & perceived) - Price-setter |
| What type of product differentiation is in an Oligopoly? | May be 1. Homogenous; have higher tendency to exhibit price rigidity to collude 2. Differentiated; find themselves competing aggressively using non-price strategies |
| What is the degree of knowledge in a Monopolistic Competition? | Imperfect knowledge - b/w firms; not fully aware of consumers' taste & preference - b/w consumers; not fully aware of nature of products sold by diff. firms |
| What is the degree of knowledge in an Oligopoly? | Imperfect knowledge - Not enough info about other firms' production techniques, marketing or pricing strategies - Consumers also not perfectly informed about diff. prices charged - Acts as a BTE too |
| What is the allocative efficiency in a Monopolistic Competition? | Allocative inefficient (not severe) - P>MC - Since a good's price in MC always exceeds MC, market can never be allocative efficient |
| What is the allocative efficiency in an Oligopoly? | Allocative inefficient (more severe) - Set price above MC |
| What is the dynamic efficiency in a Monopolistic Competition? | Partially dynamic efficient - Some innovation & product variety - Since key feature of this market is product differentiation, therefore more innovation & product variety |
| What is the dynamic efficiency in an Oligopoly? | Very dynamic efficient - Can use part of their supernormal profits to invest in research & development, resulting in innovation |
| Is there equity in a Monopolistic Competition? | Equitable due to long-run normal profit - No sustained redistribution of income b/w firms and consumers |
| Is there equity in an Oligopoly? | Inequity due to long-run supernormal profit - Profits earned due to firms ^ prices at expense of consumers -A large share of wealth redistributed from consumers to producers |
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