Question

Response Questions Part A To C A) USE YOUR OWN WORDS FOR YOUR RESPONSE: Explain how economies of scale can be a barrier to entry. B) USE YOUR OWN WORDS FOR YOUR RESPONSE: How does the demand curve faced by a monopolist differ from the demand curve faced by a perfectly competitive firm? C) USE YOUR OWN WORDS FOR YOUR RESPONSE: Why is it impossible for a profit-maximizing monopolist to choose any price and any quantity it wishes?

Answer 1

1. The economy of scale means with less output there is more output generated.

So if any firm achieves economies of scale then it means it has produced as a very large scale and competition to matching to this is very less for any firm if it wants to enter in that market .

Ten with it,new firmshave to face the barrier to entry because it requires very huge investment, time and Labour to reach that economy of a scale of that firm that is already existing.

So it is very difficult to achieve economies of scale and can be a barrier to entry.

2. The demand curve of perfect competition is horizontal which means the change in price is constant .

A perfect competition is a market -

where there are large number of buyers and sellers in the market and.

price is decided by the market forces not by the supplie and consumer.

so there is no price decision by the sellers and buyers which causes change in prices zero .

In monopoly ,the demand curve is inverse in nature because price and quantity demanded inversely related

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3. Monopolist market structure type in which-

there are only one seller and a large number of buyers

it has barrier to entry and exit but it doesn't mean that they can charge any price because it will reduce the demand and ends up with less selling .

demand curve Monopoly is inversely in nature which means price and quantity demanded are inversely related so it cannot charge any price that it wants.