Question

In: Economics

imagine an owner of a firm is thinking about raising prices. Describe the consequence of doungso...

imagine an owner of a firm is thinking about raising prices. Describe the consequence of doungso as a, oligopplist, monopolistic competitor, and perfect competitor. what are the key differences between monopolistic competition and perfect competition? One of the concern about Walmart's entey into grocery business in latter part of the 1990s was that it was set low prices, drives, drive little stores out of business, and then raise prices to monopoly levels when it had competition. can you explain why it has happened?

Solutions

Expert Solution

A market refers to the whole region where buyers and sellers of a commodity are in contact with each other to effect purchase and sale of a commodity.

Oligopoly refers to a market situation and which there are few firm selling homogeneous or differentiated product. oligopoly is sometimes also known as competition among the few as there are few sellers in the market and every seller influences and is influenced by the behaviour of other firms. Monopolistic competition refers to a market situation in which there are a large number of buyers with very closely related but differentiated products. Market of product like soap, toothpaste , AC are examples of monopolistic competition. Perfect competition refers to a market situation where there are very large number of buyers and sellers dealing in homogeneous product at a price fixed by the market.

The key difference between Perfect competition and Monopolistic competition are : in Perfect competition homogeneou products are been sold. In Monopolistic competition closely related but differentiated products are being sold. In perfect competition no selling cost are incurred in monopolistic competition high selling cost are spent.

In case of Wallmart the firm was a price maker and monopoly firm and industry are one and the same thing so firm has complete control over the industry output ,as a result monopolist is a price maker and fixes its own price. It can influence the market price by changing the supply of the product. Another reason for a Monopoly arises due to sole ownership or control of certain essential raw materials needed in a particular industry.


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