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Monopolistic Competition and Oligopoly Firms' Strategies

   

Added on  2019-09-18

13 Pages2733 Words359 Views
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MICROECONOMIC ANALYSIS
Monopolistic Competition and Oligopoly Firms' Strategies_1

Table of contentsQuestion 1:.................................................................................................................................3Question 2:.................................................................................................................................4Question 3:.................................................................................................................................4Question 4:.................................................................................................................................6Question 5:.................................................................................................................................6Question 6:.................................................................................................................................7Question 7:.................................................................................................................................9Question 8:...............................................................................................................................10Question 9:...............................................................................................................................11Reference list............................................................................................................................12
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Question 1:a.In this graph, the point of intersection of demand and supply is the equilibrium price.Approximately the equilibrium comes up to 3400 level of quantity and 17 dollars price.b.The tariff that has been imposed on the radio can increase the producer surplus tothe extent of the increase in the amount of quantity supplied in excess of demand.If the producers would increase the amount of quantity supplied to a great extentthen they would have to pay more tariff (Friedman, 2017, p.31).c.The government would collect the amount of tariff which is equal to the tariff onone domestic fan and the numbers of fans sold by the producers. The Deadweightloss is the amount of loss of tariff arising out of the improper allocation ofresources.d. If the government had used a quota then it would be able to earn tariff revenue onthe quota of the sale of domestic fans by a producer (Posner, 2014). Question 2:a.A perfectly competition is a type of competition where there are unlimited buyers andsellers selling products which are completely same with each other (Azevedo &Gottlieb, 2017, p.67).AssumptionsA large number of buyers and sellers- In a perfectly competitive market there are a largenumber of buyers and sellers.
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Full knowledge- Each and every buyer and seller have full knowledge regarding the priceand nature of the products.Fully homogenous products- Products sold by all the firms are fully same.Free entry and exit- Existing firms can leave the industry and new firms can join theindustry at their own will.b.Demand curve in the perfectly competitive market is fully horizontal or perfectlyelastic because the products are all same. Besides, buyers have full information(Kirzner, 2015). Suppose a seller increases the price of his product slightly the buyerswould immediately move to other sellers. This shows that the firms are price takers.c.In perfect competition, the demand curve of an individual firm is perfectly horizontal.Irrespective of the quantity produced by the firm in a perfectly competitive market,the price is the same, so the price is equal to MR.Question 3:a.The short-run supply curves are perfectly related to the short run marginal costcurves. In short run, the Marginal cost curve cuts the average variable cost curve andthe average total cost curve in the middle (Varian, 2014). The point of intersection isexpanded and plotted on another graph showing the market supply curve in the short Run.b.The long-run market supply curve is referred to as the sum total of the individualfirm's supply curve. This is the degree of response of the short run supply in a marketwhen there is a change in the demand. Figures A and B explain different supply
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