(i) Since the demand curve of XYZ Co. is downward sloping, it has to lower its price to sell additional units of output.
(ii) But in perfect competition the demand curve is parallel to x-axis as the firm can sell any amount of the output at the same price.
(iii) Hence, XYZCo. is not a price taker but a price maker.

(i) The given statement is correct. It is the expenses which are incurred for promoting sales or inducing customers to buy a good of a particular brand.
(ii) This includes, the cost of advertisement through newspaper, television and radio and cost on each other sales promotional activities.
(iii) As selling costs by the firms in the form of various promotional tools have become a routine activity and the firm generally persuades or lures the customer to avail from one brand to another.

(i) Selling cost is the expenses which are incurred for promoting sales or inducing customers to buy a good of a particular brand.
(ii) Theoretically, a consumer is the king because whatever he desires/ demands is produced/ supplied.
(iii) But in reality this is not so. Advertisement and salesmanship bias his mind in favour of certain commodities which otherwise may not be good.

(i) Suppose that initially there are two firms in an industry and both are same but inefficient.
(ii) Their MC curves are at a high level and consequently they charge a higher price and produce less.
(iii) They realize, however, that if they merge with each other - and thereby become a monopoly they can reduce their cost.
(iv) For instance, one firm may have excellent technical manpower but may not have good marketing skills, whereas the other may not have good technical manpower but possesses superior marketing knowledge by merging the resulting monopoly firms MC curve will be at a lower level and thus it will be more efficient firm.
(v) This, by it self will induce the monopoly to charge a price which is less and produce a quantity which is greater than when both firms were competing with each other.

No close substitute:
(i) A monopolist produces all the output in a particular market. So, there is no close substitute in monopoly.
(ii) The monopolist is a 'price-maker'. It does not mean that monopolist can fix both price and the quantity demanded. If he fixes a high price, less commodity will be demanded.
(iii) Implication: The result is an inelastic demand curve as shown in Figure. The demand curve is a constraint facing a monopoly firm. Demand curve is also the price line and the AR curve. Since Ar is downward sloping, MR lies below AR curve and is twice as steep as the AR curve.

(i) New firms can enter the market, if found profitable. Similarly, inefficient firms already operating in the market are free to quit the market if they incur losses.
(ii) It is because of this feature that like perfect competition, monopolistic competition also gives rise to normal profit.
(iii) No firm receives abnormal profit in the long run as then new firms can emerge and old ones can expand output and adjust supply with changing demand.

(i) Price rigidity refers to a situation in which whether there is change in demand and supply the price tends to stay fixed.
(ii) If a firm tries to reduce the price the rivals will also react by reducing their prices. Likewise,if it tries to raise the price, other firms will not do so. It will lead to loss of customers for the firm which intended to raise the price.

(i) Interdependence means that actions of one firm affects the actions of other firms.
(ii) Since the number of sellers is small, each firm has to take into consideration the possible reaction of its competitors, when making decisions.
(iii) The business decision of a single seller will have a substantial impact on the product price, output and profits of the rival firms.
(iv) For example the "Na tiona1 Newspapers" market, when the "Economic Times" introduced invitation pricing policy-they offered the newspaper at a price of Rs. 1.50 on weekdays. The Hindustan Times was forced to reduce its prices from Rs.2.50 per copy to Rs.1.50 per copy on weekdays. When Hindustan Times was celebrating its 75 years of service, they offered the newspaper at Rs.1/-weekdays. The Times of India responded by matching the price cut.

(i) The number of sellers in an oligopoly market is small-when there are two or more than two, but not many sellers.
(ii) What matters is that these few sellers account for most of the industry's sales.
(iii) These "few" sellers consciously dominate the industry and indulge in intense competition. Each firm is aware of that it possesses a large degree of monopoly power.
(iv) For example, the market for mobile service provider in India is an oligopolist structure as there are only few producers of mobile service provider. There exists severe competition among different firms and each firm tries to manipulate both prices and volume of production to outsmart each other.

(i) Price rigidity refers to a situation in which whether there is change in demand and supply, the price tends to stay fixed.
(ii) In an oligopolistic market firms are in a position to influence the prices.
(iii) However, they stick to their prices in order to avoid a price war. If a firm tries to reduce the price the rivals will also react by reducing their prices. So, it will be of no benefit.
(iv) Likewise, if a firm tries to raise the price other firms will not do so. As a result, the firm which intended to raise the price will lose its customers. So, oligopoly behaviour leads to price rigidity in an oligopolistic market.

Oligopoly firm may-
(i) cooperate with each other and formally have a contract or written document of their policies.
(ii) cooperate with each other but have tacit (informal) understanding.
(iii) not cooperate with each other.

When demand curve is elastic (e > 1), MR is positive.
The relationship is given by,
MR=P\(\left( 1-\frac { 1 }{ e } \right) \)
Graphically, it is shown as is given here.

(i) The reason why firm in monopolistic competition earns zero profit in the long run is free entry and exit of firm.
(ii) If firm earns super-normal profits in the short run then new entry will take place in the long run. If the firm is incurring losses in the short run, firm will leave in the long run.
(iii) The result is zero abnormal profits in the long run.

(i) The demand curve of a firm under monopolistic competition is negatively sloped because of product differentiation.
(ii) The product of the sellers are differentiated but close substitutes of one another.
(iii) Each seller has some degree of monopoly power of 'Making' the price. But since there are many close substitutes available, the result is downward sloping and elastic demand curve.