Project Report on Monopolistic
Added on 2020-06-05
24 Pages3710 Words57 Views
SHORT ANSWERQUESTIONS
TABLE OF CONTENTSQUESTION 1...................................................................................................................................1A)............................................................................................................................................1B)............................................................................................................................................3QUESTION 2...................................................................................................................................6A)............................................................................................................................................6B)............................................................................................................................................8QUESTION 3.................................................................................................................................10A)..........................................................................................................................................10B)..........................................................................................................................................13QUESTION 4.................................................................................................................................15A)..........................................................................................................................................15B)..........................................................................................................................................17REFERENCES..............................................................................................................................19
ILLUSTRATION INDEXIllustration 1: Monopolistic market structure..................................................................................2Illustration 2: Oligopolistic market structure...................................................................................2Illustration 3: Demand curve...........................................................................................................4Illustration 4: Marginal revenue curve.............................................................................................4Illustration 5: Profit maximisation level..........................................................................................5Illustration 6: External cost of production.......................................................................................7Illustration 7: External cost of consumption....................................................................................7Illustration 8: Congestion tax...........................................................................................................8Illustration 9: Negative externality due to congestion tax...............................................................9Illustration 10: Two sector circular flow of income......................................................................11Illustration 11: Three sector circular flow of income....................................................................11Illustration 12: Four sector circular flow of money.......................................................................12Illustration 13: Inflationary gap.....................................................................................................16Illustration 14: Deflationary gap....................................................................................................16Illustration 15: Expenditure line....................................................................................................17
QUESTION 1A)Definition:Monopolistic market:The structure of market in which only one company operates in particular area and offer itsgoods and services to the people is known as monopolistic market. In this, any other businesscannot enter in the market and operate (Chetty, 2012). Oligopolistic market:It is similar with the monopolistic market up to certain extent where instead of one, two or threecompanies dominate the area and provide products and services. Further, such businesses havehigh market share and generate profit up to the higher level.Assumption:It has been assumed that, due to operating single business, level of competition is negligible inthe market. Along with this, firm of monopolistic market able to charge more prices and boostup profit without any product differentiation.Apart from this, under the oligopolistic market competition is very low in which up to the verylower extent companies use product differentiation strategy (Dopfer, 2012).Diagram:1
Illustration 1: Monopolistic market structureIllustration 2: Oligopolistic market structureAnalysis:Firms operating in monopolistic market not uses strategy of product differentiation because theyalready have high market share. On the other side, companies of oligopolistic market adopt thisparticular tactic sometimes due to operating two or three firms. The reason is that, attract2
customers towards them and gain competitive benefits. B)Kinked demand curve:Economic theory of this particular curve is related with the two markets like monopolistic andoligopoly. Further, the stated curve reflects sticky prices of the product and services usingmarginal costs and revenue (Messai and Jouini, 2013). Calculation of marginal revenue:Competitors quantitydemandedPrice ($)Competitorsfollow:quantitydemandedTotalrevenue(Column 1* 2)Marginalrevenue(MR)Marginalcost (MC)Marginalprofit (MP)(MR - MC)20200354000-15000301954058501850150035040190457600175015002505018550925016501500150601805510800155015005070175601225014501500-50Diagram:i) Demand curve3
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