A health-care firm is looking to expand to international markets in an effort to increase profits. One potential location has only a few competing health-care providers, each holding a significant percentage of market share. Licensing requirements are high, but the firm may consider establishing a presence in the new location to enjoy _____.

Question

the high prices that arise from monoplistic competition
the horizontal demand curves
the high prices that arise from perfect competition
the downward-sloping demand curves

Answer 1

The correct choice in this scenario would be the downward-sloping demand curves.

This is because the presence of only a few competing health-care providers typically indicates a market structure that is not perfectly competitive, which tends to be characterized by downward-sloping demand curves for the services offered. In such a market, firms have some degree of pricing power, allowing them to potentially set higher prices than they would in a perfectly competitive market. Therefore, establishing a presence in this new location could allow the health-care firm to benefit from this pricing flexibility.