Question

1. Technological dissemination or diffusion (i.e., the spread of new technologies through the industry) in a price taker market tends to
a. stop
b. take place at a rapid rate
c. take place at a slow rate
d. be constantly interrupted by barriers to entry and barriers to diffusion
e. be illegal under U.S. antitrust laws
Group of answer choices

2. At equilibrium in an oligopoly, the size of economic profits will remain high if
a. there are no barriers to entry
b. There are strong barriers to entry
c. There are diseconomies of scale
d. The law of Diminishing Returns applies
e. The product has a negative income elasticity
Group of answer choices

Answer 1

Ans. 1. b) take place at a rapid rate.

Since in a price taker market, all the firms have no control over the price we find that if one of the firm introduces a new technology in the market, it gets diffused very quickly throughout the market due to no barriers to entry. Hence technological diffusion will take place at a rapid rate.

Ans 2. b) There are strong barriers to entry.

Strong barriers to entry helps in the firms in the market to maintain their profits since they will not have to compete with the new firms that would enter the market otherwise. Hence, profits in an Oligopoly depends on the barrier to entry.