10th Edition
BOYES + 1 other
Publisher: Cengage Learning
ISBN: 9781285859460




10th Edition
BOYES + 1 other
Publisher: Cengage Learning
ISBN: 9781285859460
Chapter 25, Problem 11E
Textbook Problem

Do you agree or disagree with this statement:
"A monopoly firm will run a much less safe business than a perfect competitor”? Explain your answer.

To determine

To explain: The agreement or disagreement with the given statement.

Explanation of Solution

Perfectly competitive market structure is that situation where large number of buyers and sellers exist. Other features of perfect competition are:

  • Homogeneous products
  • Industry is the price maker
  • Firm is the price taker
  • No individual buyer or seller can influence industry price.
  • Demand curve is AR curve which shows P = AR = MR
  • Long run equilibrium is P = SAC = SMC = min LAC
  • Firms earn zero economic profits in the long run

Monopoly is a market structure where only a single seller exists. Certain distinctive features of monopoly are as follows:

  • only a single seller exists,
  • product is differentiated,
  • low price elasticity of demand for own goods which means inelastic demand for own goods,
  • very low cross-price elasticity of demand which means...

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