“A monopolistic competition lies in-between a monopolistic and perfect competition market structures.” Discuss.
Monopolistic competition represents a market structure that combines elements of both monopolistic and perfect competition. In a monopolistic competition, numerous firms operate in the market, similar to perfect competition. However, unlike perfect competition, each firm offers a slightly differentiated product, _________ _____ __________ __________ __________.
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Using appropriate diagrams compare and contrast short-run equilibrium conditions with the long-run equilibrium condition faced by a firm under monopolistic competition.
With the help of a diagram show the effect of the minimum wage rule on the labour market given the wage is set above the market equilibrium wage rate.
Differentiate between the cooperative and the non-cooperative behaviour under Oligopoly.
Differentiate between changes in demand and changes in quantity demanded.
Consider Figure 1 below where MC, ATC, AVC, D, and AR represent the marginal cost, average total cost, average variable cost, demand, and average revenue curve respectively under a perfect competition. Based on the figure, answer the following questions:
(i) What is the profit maximising level of output for this firm in the short-run? At this quantity, what is the marginal revenue?
(ii) How much is the total cost for this firm in the short-run equilibrium?
(iii) In the short run, is the firm making economic profit or suffering loss? How much is that profit or loss? Should the firm shut down?
(iv) How much is fixed cost faced by this firm at equilibrium?
(v) What is the break-even price for this firm? What is the shut down price for this firm?
(vi) If fixed cost increases further, what impact will this have on this firm’s profit maximising level of output in the short run?
Consider the demand curve AD of a good in Figure 2. The distance AB, BC and CD are equal to x, y and z units, respectively. In terms of x, y and z, what will be the price elasticity of demand for the good at points A, B, C and D?
Compare the possibility of earning Economic profit by the firms operating under the three types of markets, viz. perfect competition, monopoly, and monopolistic competition.