Question

The following questions Will characterize perfect competition or monopoly indicate which one it is on each question.

A.) the firm promotes its image by making generous contributions to a local orchestra group

B.) the MR decreases with respect to firms increasing total output

C.) the firm finds it can separate that the total demand for its products according to the different price elasticities if demand of its customers

D.) the firm enjoys substantial economies of scale

E.) the firm enjoys positive profit in the long run

Answer 1

A) This is the characteristic of perfect competition. As in the perfect competition, the firm has to engage in other activities rather than price to attract customers.

B) This is the characteristic of Monopoly, as in perfect competition the MR is constant.

C)  This is the characteristic of Monopoly, as a monopolist can price discriminate on the basis of demand elasticities of the demand.

D)  This is the characteristic of Monopoly, as monopolist enjoys economies of scale which helps to set monopoly in the market. In Perfect Competition, the cost of each firm is assumed to be constant.

E)  This is the characteristic of Monopoly, as there is positive profit in the monopoly and in perfect competition there is only normal profit in the long run.