Question

1. What do you think best describes each of the following markets: perfect competition, monopoly, oligopoly or monopolistic competition? Explain. a. The market for cars. b. The market for soy beans. c. The market for cellphones. d. The market for dining out in a large city. 2. Why is price equal to marginal revenue for a perfectly competitive firm but not for a monopolist?

Answer 1

The market for cars is best represented by a monopoly as there are very limited big companies who control the market and there are significantly huge number of consumers who have any control over the market( We assume away the market for luxury cars).

The market for soybeans is a perfect competitive market as there are huge number of buyers and sellers and each of the have almost no market control.

The market for cellphones is a oligopoly as there are a few large corporations like Apple, Samsung, Google, Lenovo who compete amongst themselves for the market control while there are potentially huge number of buyers.

The market for dining out in a large city is represented by a monoplistic competition as each restaurant, take out etc is essentailly small compared to the entire market space and has very limited market control. They all sell differentiated good in terms of quality of food, service, ambience etc and thus charge different prices.