Question

Question 1:

Pick one of the following and market types in economic, analyzing the properties of the market (pricing, output, decisions, and market concentration) in the context of a case study

1. Perfect Competition

2. Monopoly

3. Monopolistic competition

4. Oligopoly

Guidelines:

1. Number of pages: 15 to 18
2. Font 1 and 1.15-line space
3. Times new Roman
4. Pages must be numbered
5. Table of content
6. References (APA style)

Answer 1

Perfect Competition

Pricing - In perfect competition market, any profit maximizing firm will have to face the market price equal to its marginal cost. That is factor price equal factor marginal revenue product.

Output - In perfect competition market, the output quantity is determined on the basis of consumer demand.That is, a firm and industry should be in equilibrium at a level of price where Quantity demand is equal to quantity supplied.

Decisions - Under perfect competition market, a firm can sell as much quantity as it wishes to sell as long as it Accepts the current market price.

Market concentration - Perfect competition market implies a concentration ratio that ranges from 0% to 50% and is considered as low concentration

Monopoly

Pricing - In monopoly market situation, price is set above Marginal cost and the firm earns a positive economic profit in short run. In long run the firm will keep its price where marginal revenue is equal to marginal cost.

Output - Profit maximizing quantity will occur in monopoly market where Marginal revenue equals Marginal cost.

Decision - Monopoly production decision to maximise output monopolies try to produce a quantity where marginal supply is equal to marginal cost.

Market concentration - Concentration ratio of monopoly is more than 60% of total market sale. If the concentration ratio of any firm is equal to 100 % that means the company is in monopoly.

Monopolistic competition

Pricing - Monopolistic competition has the price same as monopoly which is marginal revenue is equal to marginal cost.

Output - Output of monopolistic firm is also same as monopoly.

Dicision - Monopolistic market decision to maximize output is where marginal supply is equal to marginal cost.

Market concentration - A ratio less than 40% indicates monopolistic competition market.

Oligopoly

Pricing - This is a market situation which is price taker not price maker. Firm will sell its product at the dominent firms price.

Output - Output under oligopoly is indeterminate because every individual firm can sell all that it wants to at the going market price.

Decision - This is a market situation where there are small number of firm but every firm takes in consideration to the reaction to the rival firms.

Market concentration - The concentration ratio of oligopoly is determined as above 60% of total market sales.