Question

1. Who benefits from a perfectly competitive market? Who wants perfectly competitive markets, and who does not want perfectly competitive markets? Why?

2. If your firm is in a competitive market, what can you choose?

3. In managing or creating a firm, would you rather operate in a competitive market or a monopoly? Why?

4. Is a monopoly a good or a bad thing for society? Why

Answer 1

1)

Perfectly competitive market is characterized by the large number of buyers and sellers and products are identical in this market. all firms are price taker in this market. The firm produces where the P is equal to MC.

The consumers tend to get the goods at the lower price. Thus, consumer surplus is maximum in the perfectly competitive market.

The producer get only normal profit over the long runs or it is called the zero economic profit. Hence, producer doesn't want to stay in the perfectly competitive market. the producers would want to stay in the Monopoly market. The firm can get positive economic profit over the long run in the Monopoly market.

2)

All the firms in the perfectly competitive market are price taker. thus firms controls the output level but these firms cannot choose the price level .these firms have to accept the given price . the price is decided by the market forces of demand and supply. the single firm cannot influence the price levels in the market. Thus, all firms are price taker and they choose only the output level.