Question

1. What is the difference between a natural monopoly and a monopolistic practice?

2. Why are monopolistic practices illegal?

3. What happens to the price and the quantity produced under monopoly compared to what happens in perfect competition?

4. What is the difference between perfect competition and monopolistic competition?

5. Why is oligopoly so criticized? In other words, what happens to the price and the amount produced under oligopoly compared to what happens in perfect competition or monopolistic competition?

Answer 1

2);- under monopolistic competition raises no barriers to entry, which continues so long as the profits are positive. As firms enter demand curves shift left until they reach the average cost curve at which point, profits = 0.

While natural monopoly is defined as an industry in which one firm can achieve economies of scale over the entire range of market supply.

2) :- Monopolistic practice are illegal if they are maintained by improper conduct like predatory or Exclusionary act.

When monopolistic do illegal act :

•Price discrimination :- seller sell similar goods to buyer at different price.

•Exclusive dealing:- force buyers or seller to do buy Or sell all most all of good or service from single seller.

•Trying contact : force buyer to buy other good too without needed one otherwise seller will not sell product to them.

•Buy stock in Compitatitor company

•Interlocking directorship.

3) :- in perfect competition price is equal to marginal cost and economic profit earn by firm is equal to zero but in monopoly the Price is above the marginal cost and firm earn positive economic profit .

Perfect competition produce equilibrium in which quantity and price are economically efficient.