Homework Answers
Answer:
| Perfect competition | Monopoly |
Monopolistic competition & Oligopoly |
|
| No. of firms | very high | only one | many/few |
| Product characteristics | identical | unique | differentiated/either differentiated or identical |
| Example of market structure | agriculture | national defense | soft drinks |
| Entry | free entry.firms enter due to positive profits in the short run. | complete barrier to entry due to very high cost of production or difficulty to the potential entrant. Patents, exclusive right over natural resources form barriers to entry. For example- pharmaceuticals. | Free entry in monopolistic competition till positive profit is earned/complete barrier to entry in oligopoly due to very high cost of production or difficulty to the potential entrant. |
| Exit | Free exit due to break even or when there is loss | very difficult to exit due to high capital investment | easy exit from monopolistic competition/ difficult to exit from oligopoly due to high capital investment |
| Production decision | intersection of demand and supply curve | MR=MC and corresponding price on the demand curve | MR=MC and corresponding price on the demand curve |
| Is advertising efficient | No | No | Yes due to product differentiation |
| Is there positive profit in long run | No | Yes | No for monopolistic competition/Yes for oligopoly |
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ignore the writting but if you can fill in all the boxes without and with the writting Summary Comparison of Market...
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17. Market power a. is the capability to increase price without losing all sales. b. exists whenever the firm faces a downward-sloping demand curve. c. is greater the less elastic is demand. d. is smaller the more positive is the cross-price elasticity of demand. e. all of the above. 18. A monopoly is maximizing short-run profit at a point on demand where demand elasticity is -3. What is the Lerner index? a. 3 b. 1/3 c. 33.3 d. -3/4 19....
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