Question

Homework Chapter 11 Due March 3 :30 12 List the four criteria for a market to be perfectly competitive G is perfectly competitive (or close to perfectly competitive a m e of a market that List the two criteria for how a monopoly arises. Give an example of a market that has monopoly for close to a monopoly Price 100 150 250 5000 What is the equilibrium price and quantity of this market is competitive Calculate producer surplus, consumer surplus, total surplus, and deadweight loss if this were competitive

Answer 1

1.

a. Four features of a perfectly competitive market:

i. There is a larger number of suppliers in the market.

ii. The product sold is homogenous.

iii. The price is set by the market where the market demand and supply are taken into consideration. There is no influence of an individual seller in the price making and hence he is a price taker.

iv. There are free entry and exit of the firms in the market. One can enter if finds profitable and left if making losses.

An example of perfectly competitive market is the agricultural market.

b. Two features of a monopolist:

i. There is only one seller in the market.

ii. The price is set by the monopolist himself, however, there is a tradeoff between the price and the quantity sold in the market.

An example of a monopolist is the Indian Railways which is managed and controlled by the government and there can be no interference by the private players in this sector.