Question

2. Of the 4 markets discussed, which market structure can achieve allocative and productive efficiency in the long run

3. Which market structure can have both homogeneous and differentiated products

4. Describe the characteristics of a pure monopoly

5. What are the benefits of monopolistic competition?

6. Please explain how shut-down rule is applied.

7. Discuss the major barriers to entry into an industry

Answer 1

2.

Perfect competition.

Explanation :

Perfectly competitive firm produce where price =MR=MC =minimum ATC in long run. So, it is allocatively efficient because price =MC and it is productively efficient because they produce at minimum ATC.

3.

Oligopoly

Explanation :

Oligopoly market has firms that can produce homogeneous product and differentiate product. Monopolist produce unique product. Monopolistic competition has differentiate product. Perfectly competitive firm produce homogeneous product.

4.

Characteristics of pure monopoly :

There is only one seller.

There is barriers to entry.

They produce unique products.

They are price maker.

5.

Monopolistically competitive firm produce homogeneous product so, consumer can benefits from consumption of quality product.

There are many firms and free entry and exit in the market, so it can create competition and thus, conclude with reasonable price to consumers.

It is beneficial for producer as they can make price (price maker).