Question

There are four market models: perfect competition, monopolistic competition, oligopoly and monopoly. Briefly discuss the assumptions of each of these four models and give examples of each. Explain the long run economic profit earned by each of the four. Explain how the concept of economic profit might help explain the rationale for the government’s granting of monopolies to those firms that protect their product with a patent.

Please answer in paragraph, no bullet points or numerical and I will rate.

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Answer 1

Answer:-

Perfect competition

Perfect competition is considered as the perfect or the standard against which everything is judged. Perfect competition is portrayed as having:

Numerous purchasers and dealers. No one has control over the market.

Perfect information by all gatherings. Clients know about all the items on offer and their costs.

Firms can sell as much as they need, however just at the value administering. In this way dealers have no power over market cost. They are value takers, not value creators.

All organizations produce a similar item, and all items are perfect substitutes for one another, for example merchandise delivered are homogenous.

There is no publicizing.

There is opportunity of section and exit from the market. Sunk expenses are barely any. Firms can, and will travel every which way as they wish.

Organizations in perfect competition over the long haul are both beneficially and allocatively productive.

Example of Perfect Competition:

Rural markets are examples of about perfect competition too. Envision shopping at your neighborhood ranchers' market: there are various ranchers, selling similar organic products, vegetables and herbs. You can without much of a stretch discover the costs for the products, yet they are normally about the equivalent.

Monopolistic Competition

Monopolistic market structure portrays a market where firms sell comparable products or administrations that are not perfect substitutes. All the organizations in the business have low market power consistently disseminated among the market members. There are low obstructions to passage and exit in the market and firms' choices don't affect the choices of different firms. Over the long haul, financial benefit is zero.

Example of a monopolistic competition showcase is the lodging business.

Oligopoly:

is a market ruled by a couple of providers. A high hindrance as far as possible the quantity of providers that can contend in the market, so the oligopolistic firms have extensive impact over the market cost of their item. Be that as it may, they should consistently think about the activities of different firms in the market when evolving costs, since they are sure to react in a manner to kill any progressions with the goal that they can keep up their piece of the pie.

Example

Vehicle makers are a genuine example of an oligopoly, in light of the fact that the fixed expenses of car fabricating are exceptionally high, along these lines restricting the quantity of firms that can go into the market.

Monopoly:

A monopoly exists in regions where a firm/substance is the main (prevailing) power that sells an item/administration in an industry. This gives the substance enough capacity to get different contenders far from the commercial center. This might be a direct result of the business' prerequisite for innovation, high capital, government guideline, licenses, as well as high conveyance overheads.

Once Monoply is set up, because of absence of competition customers are accused more significant expenses of less other options. Monopoly regularly takes the state of Pure Monopoly when none of the substitutes are accessible in the market.

Alongside high boundaries to section for contending firms, organizations that work restraining infrastructures are value producers. This implies they decide the expense at which their items are sold. These costs can be changed whenever.

Imposing business models are possibly permitted to exist when they advantage the buyers.

examples:

Indian railroads (Government), Google, Intel, and so forth.

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