In: Economics
• When a seller decides to change his price for a particular good, will quantity demanded change drastically? And what will happen to the total revenue, will it increase or fall?
•Will individuals form teams or firms in all settings?
•Economic profit is usually lower than accounting profit. A firm that makes zero economic profit is said to be earning normal profit. Is zero economic profit bad for a firm?
•Discuss the difference between monopolistic competition and oligopoly.
•What makes it rare for an industry to be in a perfect competition setting?
1. Yes the quantity demanded will change according to the price changed (not drastically) Example if the price is p1 and quantity demanded is q1 if the price will change to p2 then quantity demanded will also change to q2. The total revenue will rise if the price is been increased and will fall when the price is decreased because Price and total revenue have a positive relationship when demand is inelastic (price elasticity < 1), which means that when price increases, total revenue will increase too.
2. The individuals will not form teams or Firms in all settings.
3.Yes it may be bad for a firm because there will be no incentive to enter or exit from the market.
4. In monopolistic competition
(1) Numbers of firms will be, many
(2) Types of products,Differentiated
(3) Control over price, some depends on product differentiation.
(4) Entery, Relatively easy
(5) Nonprice competition, very much
(6) Example Resturant, Hotels,Pub.
In oligopoly
(1) Numbers of firms will be, Few
(2) Types of products, standardized or Differentiated
(3) Control over price, Limited with mutual interdependence.
(4) Entery, significant barriers
(5) Nonprice competition, very much with Differentiated products
(6) Example manufacturing automobile, computer etc.
5. Firms can enter and exist the market without any problem that makes it rare for an industry to be in a perfect competition settings.