Match the characteristics with their market structure:
(a) Expand output until MC=MR
(b) Elasticity of demand depends on pricing policies of rivals
- A(a) Pure competition, (b) Pure Monopoly
- B(a) Pure Monopoly, (b) Monopolistic competition
- C(a) Pure competition, (b) Oligopoly
- D(a) Monopolistic competition, (b) Oligopoly
Solution & Step-by-step Explanation
* Characteristic (a): Profit maximization condition across almost all market structures (including Monopolistic competition and Pure competition) is to expand output until Marginal Cost equals Marginal Revenue (MC=MR).
Characteristic (b): High interdependence among a few sellers means that the elasticity of demand for a firm's product directly depends on the pricing policies and reactions of its rivals. This is the defining feature of an Oligopoly.
Looking at the options, option D pairs Monopolistic competition with Oligopoly, which perfectly fulfills these statements.
Characteristic (b): High interdependence among a few sellers means that the elasticity of demand for a firm's product directly depends on the pricing policies and reactions of its rivals. This is the defining feature of an Oligopoly.
Looking at the options, option D pairs Monopolistic competition with Oligopoly, which perfectly fulfills these statements.