Microeconomic Questions

1. "Monopolistic competition is monopolistic up to the point at which consumers become willing to buy close-substitute products and competitive beyond that point." Explain

2. "Competition in quality and service may be just as effective as price competition in giving buyers more for their money." Do you agree? Why? Explain why monopolistically competitive firms frequently prefer non-price competition to price competition.

3. Why might price collusion occur in oligopolistic industries? Assess the economic desirability of collusive pricing. What are the main obstacles to collusion? Speculate as to why price leadership is legal in the United States, whereas price fixing is not.

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