Beta Limited is multi-productfirm,producing X and Y and selling in two different markets,A and B,respectively.Advertising intensities for product Xand Yare 0.02 and 0.05, respectively. For Beta and its products, it implies that A) A is oligopolistic market and B is monopolistically competitive market B) A is oligopolistic market and B is perfectly competitive market C) A is monopolistically competitive market and B is oligopolistic market D) Both A and B are perfectly competitive markets How can the answer be C. I think in MPC markets you need to differentiate your products, so you will spend more and advertising intensity would increase. So B should be MPC.
One of the main characteristics of oligopoly is high advertising expenditure. Remember that oligopolists, eg washing powder (Unilever, Proctor and Gamble), chocolate bars (Nestle, Kraft, Mars), don't like to compete on price because price wars are too damaging (they are noted for price stickiness/stability), so advertising becomes more important. Firms in monopolistic competition, eg cafes, electricians, compete more on price and less on advertising.
