Question

Provide an example and describe the economic concepts of perfect competition, imperfect markets and profits, consider the effects of the profit maximizing condition that businesses use to guide decision-making and included in your example.

Answer 1

Market	Features	Example	Condition for profit maximization
Perfect competition	-Free entry and exit. -Homogenous products. -Firms and consumers are price takers. -No selling costs -Huge number of buyers and sellers. -zero economic profit	Market for Vegetables	Price=Marginal cost.
Monopoly	-single firm. -no close substitute of goods. -restriction on entry. -Firm is price maker -price discrimination -Positive profits	Debeers	Marginal cost=Marginal revenue
Monopolistic	-product differentiation -huge selling costs -Free entry and exit -Some control over price -Positive profits in the short run and normal profits in the long run	-Firms in hair care industries like loréal.	MR=MC

Oligopoly

-Very few firms -rigid price -Market is controlled by the few firms -homogenous goods -restriction on entry -Positive profits

Petroleum

MR=MC