Question

MARKET STRUCTURES Write the correct answer to the questions asked in the first column for each for the three (3) market structures in the other three (3) columns: Question and/or Description PERFECT COMPETITION MONOPOLISTIC COMPETITION MONOPOLY 1. The condition for profit maximization in the short-run e... AR-AC etc. 2. The nature of economic profit In the short-run eg +ve or ve or can both. 3. The nature of economic profit in the long-run 4. The relationship between Price (P) and marginal revenue (MR) 5. Is there a market adjustment from the short-run to the long- run? 6. The condition for profit maximization in the long-run 7. What is level of price in relation to the other two market structures 8. What is the level of output in relation to the levels of output in the other two markets? 9. Describe the relative efficiency of each market in terms of price and output levels 10. Existence of excess plant capacity unutilized

Answer 1

1. Perfect competition: P = MC
Monopolistic competition: MR = MC
Monopoly: MR = MC
(These are the profit maximizing conditions in the short run.)

2. Perfect competition: Can both
Monopolistic competition: Can both
Monopoly: Can both
(Profit can be positive or negative in the short run.)

3. Perfect competition: Zero
Monopolistic competition: Zero
Monopoly: Positive
(Profit in the long run is zero for first two and positive for a monopolist.)

4. Perfect competition: P = MR
Monopolistic competition: P > MR
Monopoly: P > MR
(P = MR under perfect competition and P > MR for the other two.)

(Note: As HOMEWORKLIB's policy, 4 subparts are to be answered at a time.)