Diametrically Opposite Perfect Competition â€Myassignmenthelp.Com

Question: Discuss About The Diametrically Opposite Perfect Competition? Answer: Introducation Monopoly has 1 firm, while perfect competition has many firms Monopoly faces a down sloping demand curve, while a firm in perfect competition has a horizontal demand curve. The monopolist is a price maker, while a firm in a price taker in perfect competition. Monopoly has entry barriers while perfect competition has free entry and exit of firms. A monopolistic competition market structure is closer to perfect competition, than to monopoly. In monopolistic competition there are less firms as compared to a perfect competition. Each firm in monopolistic competition faces an elastic demand curve that slopes down- each firm has limited control over price. All goods are homogeneous in perfect competition, while they are differentiated in monopolistic competition. This differentiation leads to the birth of a product group, which consists of goods that are close substitutes of each other. Perfect competition and monopolistic competition are similar as they do not allow abnormal profits in the long run, and allow free entry and exit of firms. . Such firms face a downward sloping curve, which means that price and quantity are inversely related. If they increase quantity then they face a lower price, which reduces profits. Ina way they face a tradeoff between lowering average cost( by increasing quantity) and lower price. The balance between price and average cost is reached by equating marginal revenue with marginal cost. FALSE, because a firm in monopolistic competitive structure cannot make positive economic profits in the long run. This is because there is free entry and exit. If profits exist new firms will enter and ensure prices are lowered till all positive profits are wiped out. Equilibrium is reached when only normal profits are made. Option A is best. This is because AVC P ATC which implies losses in the short run. The firm continues as variable costs are covered by revenues. In the long run such losses will lead to closure as the monopolist cant continue with losses in long run. Option b is wrong as the firm will not shut down since variable costs are covered. Also once it shuts down it cant start again in long run unless some other factors change. Option c is wrong because shut down and exit are the same thing. The firm will do none. Option d is incorrect as a monopolist cant continue with losses in long run. MR at each point= change in TR/ change in Q P Q TR = P*Q MR 50 0 0 - 40 5 200 200/5=40 30 10 300 100/5=20 20 20 400 100/10=10 15 30 450 =50/10=5 10 50 500 =50/20=2.5 5 102 510 =10/52 = 0.192 2.5 200 500 10/92= 0.108 MC= 5. We use the MC=MR rule. The point where MR=MC is the equilibrium point that maximizes profits. As per the table MR=5 at Q = 30 and P=15 Yes GOOGLE is a monopoly in a narrow sense. This sense considers firms that provide all the services that Google does. No firm has the range of services that Google does, which makes it a monopoly. However there are some substitutes of various services offered by Google, which break the monopoly of Google. Hence the real answer lies in how we define the product group to which Google belongs. References IMperfect Competition . (n.d.). Retrieved july 31, 2017, from Colarado.edu: https://www.colorado.edu/Economics/courses/Markusen/fall05-4413-001/unotes7.pdf perfect competition. (n.d.). Retrieved August 2, 2017, from Staffwww.fullcoll.edu: https://staffwww.fullcoll.edu/fchan/Micro/4perfect_competition.htm