A bit of perfect competition with a dash of monopoly power (price setting ability) = monopolistic competition. You'll get a packet to meet the objectives above. The graphs are the same as for monopoly but with a flatter (more elastic) demand curve.
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Barriers to entry
We will go further into the packet in the next two days to address these other objectives for monopoly. It is particularly important to be able to compare perfect competition to monopoly - this could be the second part of a long essay, i.e. the evaluation section. Assumptions of the model
Now that we have looked at what makes up perfect competition, we turn our attention to imperfect competition and go right to the opposite end of the market structure spectrum... monopoly. We'll start off with looking at what characterizes the market and then look at the graphs. These are a bit more complicated than perfect competition so it's important that you follow the steps so that you don't put price in the wrong place... also be neat (with a ruler!) and remember the relationship between MC and AC curves. The profit maximising rule is still the same.... "where MR equals MC, that is where we want to be"!
Today we will finish off the packet. You should read the article “Why is Perfect Competition Economically Efficient?” and p108-111 of textbook. Then use graphs to explain that in the short run firms in perfect competition are allocatively efficient but may not be productively efficient, whereas in the long run they are both allocatively and productively efficient. Shut-down and break-even points
Assumptions of the model
You will be given a pack of resources which will cover the objectives above. |