True or False
Firms selling identical products create monopolistic competition.
False
Providing better customer service, introducing a new lipstick color, and sophisticated advertising are examples of nonprice competition.
True
Price fixing is an outcome of collusion.
True
A cartel is most successful when each member produces as much product as possible.
False
I agree with these.
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Great! I'm glad you agree with the answers. If you have any more questions, feel free to ask!
To verify the correctness of the statements, let's explain them one by one:
1. Firms selling identical products create monopolistic competition. (False)
- Monopolistic competition occurs when there are many firms selling similar but not identical products. In this type of competition, firms differentiate their products through branding, marketing, or quality.
2. Providing better customer service, introducing a new lipstick color, and sophisticated advertising are examples of nonprice competition. (True)
- Nonprice competition refers to competition between companies based on factors other than price. In this case, providing better service, introducing new product variations, and engaging in sophisticated advertising are all examples of nonprice competition strategies.
3. Price fixing is an outcome of collusion. (True)
- Price fixing refers to the illegal agreement between businesses to set prices at a certain level instead of allowing market forces to determine prices. Collusion, which involves secret agreements or cooperation among companies, often leads to price fixing.
4. A cartel is most successful when each member produces as much product as possible. (False)
- A cartel is a group of independent businesses that join forces to regulate production, pricing, or other aspects of their industry. To maximize profits, cartels often limit the production or supply of goods to keep prices high. Therefore, a cartel's success is generally based on members restricting production rather than producing as much as possible.
Given the explanations provided, if you agree with the statements and understand how to derive the answers, then it seems you have correctly assessed each statement.