Perfect Competition and Monopoly

1722 WordsDec 6, 20107 Pages
Question 3 Perfect Competition and Monopoly (a) I. Explain perfect competition and monopoly market structures, and identify the key factors that distinguish them. Perfect Competition Market In economic theory, the perfect competition is a market form in which no producer or consumer has the power to influence prices in the market. According to the website wordIQ.com, in order to classify the market is a perfect competition market, the market must match below criteria: 1. There are a large number of small producers and consumers on a given market 2. None of the producers or consumers can influence the price on their own (ie. Price takers) 3. Goods and services are perfect substitute (ie. The goods or services is…show more content…
There is a large number of Cantonese Cuisine restaurants in Hong Kong, and it is another factor to identify that this is a perfect competition market. The nature of product in this market can also prove that this is a perfect competition market. The product is this market is homogeneous, and the dim sum served by each restaurant is similar. Consumers can eat similar dim sum at different restaurants, at similar price. Public Buses Market in Hong Kong Unlike Australia, most people in Hong Kong use public transport for their daily life, since Hong Kong is a small place, and driving in this place involves many obstacles, such as traffic jam problem, difficult to find parking spaces, etc. Public buses are one of the most common public transport in Hong Kong, and public buses market is an example of monopoly markets in Hong Kong. To prove this is a monopoly market, previously identified key factors will be used. There is a big entry barrier for this industry, and it is almost impossible for new entrant to this market. There are three bus service providers in Hong Kong, and each of them serves different territory. For example, Kowloon Motor Bus (KMB) Company serves Kowloon and New Territories. KMB has the exclusive license from the Hong Kong Government, and it has rights to provide bus services, subject to approval from the government. Although KMB has the right to operate and provide services, it is monitored by the government, and
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