Question

What are the assumptions of perfect competition and what do they
imply about the firms’s profits in the **short and long
run?**

**b)** What is the rationale for a firm under
perfect competition to i) shut down? and to ii) exit? Defend your
answer with **an example.**

**c)** Suppose the inverse demand
function for a monopolist’s product is given by, P=12-2Q. What is
the associated price and marginal revenue if the firm wishes to
sell 4 units?

**d****) Draw a graph** to show a
monopolistic firm that is making zero profits. Is this an efficient
price quantity combination? Why or why not? Defend your answer.

Answer #1

What are the assumptions of perfect competition and what do they
imply about the firms’s profits in the short and long
run?

What are the assumptions of perfect competition and what do they
imply about the firms’s profits in the short and long
run?

What is the rationale for a firm under perfect competition to i)
shut down? and to ii) exit? Defend your answer with an
example

Draw a graph to show a monopolistic firm that is making zero
profits. Is this an efficient price quantity combination? why or
why not?

State the assumptions of perfect competition and their
implications. Discuss why competition is beautiful. Also, state why
a losing a firm should stay in business for a while and when it
must shut down.

In long-run equilibrium firms in both perfect competition and
monopolistic competition
make zero economic profits. Since both do not make any economic
profits why is price
equal to minimum ATC in perfect competition but there is excess
capacity in
monopolistic competition?

2. (a) Identify the assumptions associated with a firm operating
under perfect competition and what the implications of those
assumptions mean for its short run and long run decisions?
(b) Explain why market power leads to market failure and how
this can be corrected. (2 points)

3. What is the Lernerís index of market power? How do we measure
it?
4. Perfect competition vs. monopolistic competition:
(a) What is the difference between perfect competition and
monopolistic competition?
(b) Suppose the only long-run adjustment is free entry or exit
of firms. What is the difference between the short-run
equilibrium conditions faced by a perfectly competitive firm and
a monopolistically competitive firm? How about
the long-run equilibrium conditions?

In marijuana industry, what is the production and price of
marijuana in the monopolistic competition? Draw graph and explain
why?

What are the main characteristics associated with perfect
competition and monopoly? What do these characteristics suggest
about the degree of market power possessed by an individual firm in
each of these markets?

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