Question

7. In the 3 markets which comprised the classical model, what should we expect if only 1 firm existed? (The firm which hires and produces goods, instead of being in perfect competition, we have a situation where a monopsony in labour exist, and a monopoly in output sale exist). To answer this question, go back and (1) explain what outcome we expect to see from those market types. (2) then discuss how those outcome are different than what we find. (This is a hard question if you need help don't hesitate to come to office hours)

Answer 1

When only firm exists in the market, there is serious case of monopolization where profits get maximised and competitive scenario is throttled to an extent that barriers to entry are huge and ultimately firms charge higher tjsn ever prices.

However, as per the laws formulated in various economies, monopolization is not Permisisble an dhence regulatirs pose restrictions on firms and create significant liberalisation such that eithe rnew players enter and do not firm cartels or coliide and significantly which improves the competition scenario of market creating the consumer at better off stage.