Question

Please elaborate.

1] Why does the consumer fare better in terms of price when facing a pure competitor than when facing a seller in any other market structure?

[2] What are some examples of economies of scale and diseconomies of scale?

[3] Why can an oligopolist and a monopolist earn excess profit over the long run when a pure competitor and monopolistic competitor cannot?

[4] Why would people who basically favor free markets seek government intervention into the operation of those markets?

Answer 1

1. In pure/perfect competition there are many competitors offering the same product. Therefore, to excel in this race producers often offer lower prices to their consumers. Hence, consumers get better prices in perfect competition than in any other market structure due to plenty of competitors.

2. Economies of scale

Large scale business man can invest in higher grade latest technology.

Diseconomies of scale

Large firms face lack of communication.

3.an oligopolist and monopolist gains better profits because oligopolists are known to form cartel in which the few existing producers forms an association in which they decide the price of their produce mutually and earns a lot of profit all together as consumers do not get better prices. Similarly, in monopoly there are no competitors hence the producer gets to price his produce according to his will. These phenomena are absent in the other two forms.

4. Government intervention makes sure that even in free market the pricing are fair ands affordable to the consumers and the domestic producers are also protected and are given fair chance.