The Process of "Creative Destruction" in an Oligopolistic Industry Suggests

question 61

Multiple Choice

The process of "creative destruction" in an oligopolistic industry suggests that

• A)there are no costs of exit in oligopoly.
• B)no firm can survive in the long run.
• C)the prospect of keeping the resulting profits provides an incentive for firms to innovate.
• D)profits are driven to zero by the entry of new firms.
• E)firms can enter and leave without incurring any sunk costs of entry.

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Definitions:

Perfectly Competitive

Referring to a market structure where there are many buyers and sellers, all selling homogeneous products, with no barriers to entry or exit, leading to price determination by supply and demand forces alone.

Monopolistically Competitive

A marketplace setup in which various enterprises deal in goods that are alike but not identical, affording them some degree of control in the market.

Cost Curves

Graphical representations showing the relationship between the cost of producing goods or services and the quantity produced.

Optimal Scale

The size of a company or level of production that minimizes costs and maximizes efficiency and profit.