INSTRUCTOR DISCUSSION NOTES:
The Monopolistically Competitive “Death-Care” Market

1. What are the qualities of this industry that cause us to describe it as monopolistically competitive?

Large number of firms, each with some impact on price, selling differentiated products, tendency toward zero profitability as other firms enter the market.

2. What do you think will happen to the cost of funeral services as family members no longer want to continue the family mortuary business?

If family-operated funeral homes leave the market, we would expect price to rise, and demand to become more inelastic.

3. What do you think will happen to prices for funerals as the trend toward cremation rather than burial continues?

The price of cremations should rise, the price of burials should fall, and the overall price should rise, as more and more firms are forced to exit the industry.

Multiple Choice/True False Questions

1. According to the article, when price per service rose, number of services fell. How can demand be described there?
  1. Elastic
  2. Inelastic
  3. Unit elastic
  4. Not enough information in the article to answer.
      ANS. b

2. In the summary, the fact that firm consolidation was actually reversed afterward indicated that the consolidated firm experienced:
  1. Economies of scale
  2. Diseconomies of scale
  3. Sunk costs
  4. External costs
      ANS. b

3. In monopolistic competition, the provision of additional services should serve to make demand for that product
  1. More elastic
  2. More inelastic
  3. More negative
  4. More vertical
      ANS. a

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