Essay On Monopolistic Market Structure

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2.1) a) Long run production: b) Long run average cost curve Long run average cost can be defined as the cost per unit of output possible where other factors of production are not fixed. Long run average cost curve is also known as the ‘envelope curve’. If this curve is downward while the output is increasing, the firm has economies of scale. On the contrary, when this curve is upward, the firm has diseconomies of scale. If the curve is constant, the producer has constant returns to scale. 3 a) Features of perfectly competitive market structure: • Number of firms: in this type of market structure, the production is done by large number of firms. Because of higher number of firms, a small portion of the total supply is contributed by each firm and firms do not have market power. It depicts that no firm can determine the price and they…show more content…
a) Features of the Monopolistic competitive market structure • Number of firms: In the monopolistic competitive market, there are a number of sellers dealing in closely related product, but these products are not identical. Every firm has its own share in the market and they have limited control over the price and the conditions of the market. • Product differentiation: Every firm has its own monopoly over the product size, color, shape etc. so the products of the firms are close but cannot be perfectly replaced for one another. • Control over price: firms under this type of market structure do not determine the price and they do not accept the price. As the firms produce their own unique products they have their own control over the price in the market • Extent of the market information: In a monopolistic competitive market, both buyers and sellers do not possess full information of the prevailing market conditions. • Freedom of entry: Under this type of market structure, firms have freedom to enter or exit the market at any time they want. b) Short run and long run equilibrium of the firm Short
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