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Questions
Explain the implications of the following in a perfectly competitive market:
Freedom of entry and exit to firms
Explain the implications of Given
Freedom of entry and exit of firms under perfect competition
Solution
Freedom of entry and exit to firms:-
New firms are free to enter and existing firms are free to exit in a perfectly competitive market. This situation is possible only in the long period because new firms will join the industry with the attraction of extra-normal profit. There will be an increase in the market supply, and hence, the price will decrease. Thereby the extra normal profit will decrease. Further, if the industry incurs extra normal loss, some existing firms will tend to leave the industry which will lead to a decline in market supply and market price. The industry will not incur extra normal loss. This is how the firms in the long run earn neither extra profit nor extra loss in the industry. Thus, firms were able to earn normal profit which prevents a firm from exiting or a new firm from entering the industry.
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RELATED QUESTIONS
What are the features of perfect competition.
Homogenous product’ is a characteristic of : (choose the correct alternative)
(a) Perfect competition only
(b) Perfect oligopoly only
(c) Both (a) and (b)
(d) None of the above
Explain the implications of the following in a perfectly competitive market:
Large number of buyers
Explain the implications of the following in a perfectly competitive market :
Homogeneous products.
‘A few big sellers’ is a characteristics of : (choose the correct alternative)
a. Perfect competition
b. Monopolistic competition
c. Oligopoly
d. None of the above
Explain the implications of the following in an oligopoly market:
Non-price competition
A seller cannot influence the market price under (choose the correct alternative)
a) Perfect competition
b) Monopoly
c) Monopolistic competition
d) All of the above
Explain the significance of the feature 'product differentiation' in monopolistic competition.
State whether the following statement is true or false.
There is no product differentiation under monopolistic competition.
Distinguish between :
Output method and Expenditure method.
State with reason whether you agree or disagree with the following statement
Perfect Competition means Monopolistic Competition.
Give reason or explain:
Selling cost is incurred by a firm in Monopolistic competition.
State whether the following statement is TRUE and FALSE.
Product differentiation is not possible under perfect competition.
Define 'or' explain the following concept.
Product Differentiation:
Answer the following question.
Elaborate three main features of a monopoly form of market.
Distinguish between perfect competition and monopolistic competition on the basis of the following:
(a) Number of sellers
(b) Nature of product
(c) Selling cost
Features of oligopoly market:
- There are few firms or sellers.
- Sellers sell differentiated product.
- There is free entry and exit of firms.
- There is considerable element of uncertainty in this type of market.
PASSAGE
In India, markets for automobiles, cement, steel, aluminium, etc, are the examples of oligopolistic market. In all these markets, there are few firms for each particular product. Duopoly is a special case of oligopoly, in which there are exactly two sellers. Under duopoly, it is assumed that the product sold by the two firms is homogeneous and there is no substitute for it. Examples where two companies control a large proportion of a market are: (i) Pepsi and Coca-Cola in the soft drink market; (ii) Airbus and Boeing in the commercial large jet aircraft market.
Operating systems for smart phones and computers provide excellent examples of oligopolies in big tech. Apple iOS and Google Android dominate smart phone operating systems. Computer operating systems are overshadowed by Apple and Microsoft Windows.
- Give examples of oligopolistic market in India (1 mark)
- Explain the concept of duopoly with a suitable example from the passage (1 mark)
- Express your personal opinion based on the above information (2 marks)
In which one of the following types of markets are Average Revenue curve and Market Demand curve the same?
