Question

Make a tabular statement comparing and contrasting the conditions and results of (1) Perfect Competition (2) Pure Monopoly and (3) Monopolistic Competition in the short-run and long-run.

Answer 1

Profit-maximizing in the following cases;

1. perfect competition

P=MR=MC=AC

In the long run, the price is equal to minimum long-run average costs.

2. monopoly

the profit-maximizing condition is MR=MC and monopoly power is P-MC/MC

3. monopolistic competition

In the short run, set price where MR=MC where as in the long run price equals the minimum level of average costs.

4. Oligopoly

price is determined similarly to a Cournot model with n number of firms at least a duopoly.