In: Economics
Q1. What are the conditions for a perfectly competitive market? What are the conditions for a monopolistic market? What are the conditions for a monopolistic competitive market? What are the conditions for an oligopolistic market? How would you explain the differences among these market structures?
Perfect competition
i) very largr numbers of sellers ,so that individual firms have no market power ( means they can't affect market price Changing supply)
ii)Each firm produces identical product.
iii)Firm faces horizontal straight line demand curve
iv) horizontal straight line demand suggest,firm Profit Maximizing quantity is at ,P=MC
v) market price is determined by industry
vi)free entry and exit to market
Monopolist
i) only single seller
ii) produces good that has no close substitues
iii) complete market power
iv)faces downward sloping demand curve
v) Profit Maximizing quantity at MR=MC
vi) barriers to entey and exits to market
Monopolist competition
i) large number of sellers
ii) Produces differentiated product.each seller product is different somehow from others sellers
iii) Facing downward sloping demand curve but more elastic than monopoly/ Monopolist
iv) equilibrium at MR=MC
v)Free entry and exit to market
vi) some market power
Oligopoly
i) very few sellers
ii) each firm with a significant market share
iii) Mutual interdependence among firms
iv) due to Mutual interdependence,there is no exact relationship between price and demand,so there is no certain demand
v) barriers to entry and exit to market
vi) Large market power ,higher than Monopolistic competition but lower than monopoly