Question

Q1. What market structure most appropriately describes the corn growing industry? Why? 

Q2. Explain what the likely short-run effect of the cyclone is on the cost curves of a corn growing firm in the cyclone-affected region?

Q3. Explain why the retail clothing industry may be regarded as an example of a monopolistically competitive market. 

Q4. Explain how advertising or promotional campaigns can impact on a firm’s profits if it is successful.

Answer 1

1. Perfect competition is the market which describes the corn growing industry as all farmers are able to produce identical corn in their field. Corn is same in all respect i.e. in colour, size, etc.

Perfect Competition is a form of market structure in which there is free entry and exit of firms and firms are selling homogeneous and identical products in the market. Firms under this form of market are price takers rather than price makers. Industry determines the equilibrium price from the demand and supply curve intersection. Sellers can sell any unit of commodity at that price and firms does not have any price control over the commodity. If one seller try to charge higher price then it will lose all his customers because all firms are selling similar products in every respect like color, shape, brand, etc.