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All questions of Non-Competitive Markets for Humanities/Arts Exam
Cartels exist ina) Monopolyb) Duopolyc) Oligopolyd) Perfect Competition
Correct answer is option 'C'. Can you explain this answer?
Correct answer is option 'C'. Can you explain this answer?
|
Kavita Joshi answered |
A cartel is a grouping of producers that work together to protect their interests. Cartels are created when a few large producers decide to co-operate with respect to aspects of their market. Once
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Under monopoly form of market, TR is maximum when- a)MR is maximum
- b)MR<0
- c)MR>0
- d)MR is zero
Correct answer is option 'D'. Can you explain this answer?
Under monopoly form of market, TR is maximum when
a)
MR is maximum
b)
MR<0
c)
MR>0
d)
MR is zero
|
Aryan Khanna answered |
Marginal revenue means additional revenue generate/received from the sale of additional unit of output.In imperfect (monopoly) when TR increases MR decreases , when TR become maximum MR reaches to zero.
Price discrimination can take place only in- a)Perfect competition
- b)Oligopoly
- c)Monopolistic competition
- d)Monopoly
Correct answer is option 'D'. Can you explain this answer?
Price discrimination can take place only in
a)
Perfect competition
b)
Oligopoly
c)
Monopolistic competition
d)
Monopoly
|
|
Pooja Kumari answered |
Monopoly.... ... A discriminating monopoly is a single entity that charges different prices—typically, those that are not associated with the cost to provide the product or service—for its products or services for different consumers. Non-discriminating monopolies, on the other hand, do not engage in such a practice
The firm and the industry are one and the same in:- a)Monopolistic competition
- b)Monopoly
- c)Duopoly
- d)Oligopoly
Correct answer is option 'B'. Can you explain this answer?
The firm and the industry are one and the same in:
a)
Monopolistic competition
b)
Monopoly
c)
Duopoly
d)
Oligopoly
|
Priya Patel answered |
A type of market structure, where the firm has absolute power to produce and sell a product or service having no close substitutes. In simple terms, monopolised market is one where there is a single seller, selling a product with no near substitutes to a large number of buyers. As the firm and industry are one and the same thing in the monopoly market, so it is a single-firm industry. There is zero or negative cross elasticity of demand for a monopoly product. Monopoly can be found in public utility services such as telephone, electricity and so on.
The market price of the commodity depends on the amount supplied by the monopoly firm.- a)True
- b)Can’t say
- c)False
- d)None of these
Correct answer is option 'A'. Can you explain this answer?
The market price of the commodity depends on the amount supplied by the monopoly firm.
a)
True
b)
Can’t say
c)
False
d)
None of these
|
Rajat Patel answered |
‘Mono’ means one and ‘poly’ means seller. Thus, monopoly refers to a market situation in which there is only one seller of a particular product.
Here the firm itself is the industry and the firm’s product has no close substitute. The monopolist is not bothered about the reaction of rival firms since it has none. The demand curve of the monopolist is the industry demand curve. (Recall that in pure competition there are two demand curves).
The market demand curve is the marginal revenue curve for the monopoly firm.- a)True
- b)Can’t say
- c)False
- d)None of these
Correct answer is option 'C'. Can you explain this answer?
The market demand curve is the marginal revenue curve for the monopoly firm.
a)
True
b)
Can’t say
c)
False
d)
None of these
|
Gaurav Kumar answered |
In a monopoly market, the marginal revenue curve and the demand curve are distinct and downward-sloping. Production occurs where marginal cost and marginal revenue intersect.
The shape of the total revenue curve depends on the shape of the average revenue curve.- a)True
- b)False
- c)Can’t say
- d)None of these
Correct answer is option 'A'. Can you explain this answer?
The shape of the total revenue curve depends on the shape of the average revenue curve.
a)
True
b)
False
c)
Can’t say
d)
None of these
|
Mehakbir Singh answered |
The statement is true because average fixed revenue curve remains constant at
Under which of the following forms of market structure a firm has no control over the price of its product?- a)Monopoly
- b)Perfect competition
- c)Oligopoly
- d)Monopolistic competition
Correct answer is option 'B'. Can you explain this answer?
Under which of the following forms of market structure a firm has no control over the price of its product?
a)
Monopoly
b)
Perfect competition
c)
Oligopoly
d)
Monopolistic competition
|
Nitin Sharma answered |
Market Structures and Price Control
Introduction
Market structure refers to the environment in which a firm operates. It determines the level of competition, the number of players, and the type of product that is sold. There are four main types of market structures, namely, perfect competition, monopolistic competition, oligopoly, and monopoly. Each of these structures has its unique characteristics that influence the firm's ability to control the price of its product.
Perfect Competition
Perfect competition is a market structure where there are many buyers and sellers, and no single entity has control over the price. In a perfectly competitive market, the product is homogeneous, meaning that all firms sell the same product. Firms in a perfectly competitive market are price takers, meaning that they have no control over the price of the product. The price of the product is determined by the market forces of demand and supply.
Monopoly
A monopoly is a market structure where there is only one supplier of a particular product. In a monopoly, the firm has complete control over the price of the product. The firm can set any price it chooses since there are no other competitors.
Monopolistic Competition
Monopolistic competition is a market structure where there are many firms selling similar but not identical products. In this market structure, firms have some control over the price of their product. They can differentiate their product from others and charge a premium price for it.
Oligopoly
Oligopoly is a market structure where there are a few dominant firms that control the market. In an oligopoly, firms have some control over the price of their product. They can influence the price by adjusting their output levels.
Conclusion
In conclusion, a firm has no control over the price of its product in a perfectly competitive market. This is because in a perfectly competitive market, there are many buyers and sellers, and the product is homogeneous. Firms have no control over the price, and they are price takers. In contrast, in a monopoly, the firm has complete control over the price of its product. In monopolistic competition and oligopoly, firms have some control over the price of their product.
Introduction
Market structure refers to the environment in which a firm operates. It determines the level of competition, the number of players, and the type of product that is sold. There are four main types of market structures, namely, perfect competition, monopolistic competition, oligopoly, and monopoly. Each of these structures has its unique characteristics that influence the firm's ability to control the price of its product.
Perfect Competition
Perfect competition is a market structure where there are many buyers and sellers, and no single entity has control over the price. In a perfectly competitive market, the product is homogeneous, meaning that all firms sell the same product. Firms in a perfectly competitive market are price takers, meaning that they have no control over the price of the product. The price of the product is determined by the market forces of demand and supply.
Monopoly
A monopoly is a market structure where there is only one supplier of a particular product. In a monopoly, the firm has complete control over the price of the product. The firm can set any price it chooses since there are no other competitors.
Monopolistic Competition
Monopolistic competition is a market structure where there are many firms selling similar but not identical products. In this market structure, firms have some control over the price of their product. They can differentiate their product from others and charge a premium price for it.
Oligopoly
Oligopoly is a market structure where there are a few dominant firms that control the market. In an oligopoly, firms have some control over the price of their product. They can influence the price by adjusting their output levels.
Conclusion
In conclusion, a firm has no control over the price of its product in a perfectly competitive market. This is because in a perfectly competitive market, there are many buyers and sellers, and the product is homogeneous. Firms have no control over the price, and they are price takers. In contrast, in a monopoly, the firm has complete control over the price of its product. In monopolistic competition and oligopoly, firms have some control over the price of their product.
Tooth paste industry is an example of?- a)Monopolyv
- b)Monopolistic Competition
- c)Oligopoly
- d)Perfect competition
Correct answer is option 'B'. Can you explain this answer?
Tooth paste industry is an example of?
a)
Monopolyv
b)
Monopolistic Competition
c)
Oligopoly
d)
Perfect competition
|
Bhargavi Roy answered |
Monopolistic Competition
Monopolistic competition is a market structure in which many firms sell differentiated products. In this type of market, firms have some control over the price they charge for their products, but there are also many competitors offering similar products. The toothpaste industry is a prime example of monopolistic competition.
Product Differentiation
In monopolistic competition, firms differentiate their products to attract customers and create a sense of brand loyalty. In the toothpaste industry, there are numerous brands offering a variety of toothpaste options. Some toothpastes focus on providing whitening benefits, while others target sensitive teeth or bad breath. These differentiations help firms capture specific segments of the market and build a loyal customer base.
Advertising and Marketing
In monopolistic competition, firms heavily rely on advertising and marketing to differentiate their products and create brand awareness. The toothpaste industry is no exception. Companies invest significant resources in advertising campaigns to promote their toothpaste and convince consumers that their brand is superior. This advertising and marketing expenditure adds to the overall cost of production and becomes a part of the product's selling price.
Easy Entry and Exit
In monopolistic competition, there are relatively low barriers to entry and exit. This means that new firms can enter the toothpaste industry if they believe they can offer a differentiated product that will attract customers. Similarly, if a firm is not able to compete effectively, it can exit the market without significant obstacles. This ease of entry and exit helps maintain competition within the industry.
Price Determination
In monopolistic competition, firms have some control over the price they charge for their products. However, this control is limited by the competition from other firms offering similar products. In the toothpaste industry, firms need to consider the prices of their competitors when setting their own prices. They must strike a balance between attracting customers with lower prices and covering their costs and earning a profit.
Conclusion
The toothpaste industry exemplifies monopolistic competition due to the presence of multiple firms offering differentiated products, heavy reliance on advertising and marketing, easy entry and exit, and limited price control. Understanding the market structure helps businesses strategize and compete effectively in the toothpaste industry.
Monopolistic competition is a market structure in which many firms sell differentiated products. In this type of market, firms have some control over the price they charge for their products, but there are also many competitors offering similar products. The toothpaste industry is a prime example of monopolistic competition.
Product Differentiation
In monopolistic competition, firms differentiate their products to attract customers and create a sense of brand loyalty. In the toothpaste industry, there are numerous brands offering a variety of toothpaste options. Some toothpastes focus on providing whitening benefits, while others target sensitive teeth or bad breath. These differentiations help firms capture specific segments of the market and build a loyal customer base.
Advertising and Marketing
In monopolistic competition, firms heavily rely on advertising and marketing to differentiate their products and create brand awareness. The toothpaste industry is no exception. Companies invest significant resources in advertising campaigns to promote their toothpaste and convince consumers that their brand is superior. This advertising and marketing expenditure adds to the overall cost of production and becomes a part of the product's selling price.
Easy Entry and Exit
In monopolistic competition, there are relatively low barriers to entry and exit. This means that new firms can enter the toothpaste industry if they believe they can offer a differentiated product that will attract customers. Similarly, if a firm is not able to compete effectively, it can exit the market without significant obstacles. This ease of entry and exit helps maintain competition within the industry.
Price Determination
In monopolistic competition, firms have some control over the price they charge for their products. However, this control is limited by the competition from other firms offering similar products. In the toothpaste industry, firms need to consider the prices of their competitors when setting their own prices. They must strike a balance between attracting customers with lower prices and covering their costs and earning a profit.
Conclusion
The toothpaste industry exemplifies monopolistic competition due to the presence of multiple firms offering differentiated products, heavy reliance on advertising and marketing, easy entry and exit, and limited price control. Understanding the market structure helps businesses strategize and compete effectively in the toothpaste industry.
Price discrimination under monopoly depends on?- a)Elasticity of demand for the commodity
- b)Taxes and other overhead expenses
- c)Elasticity of supply for the commodity
- d)The size of the market where he sells
Correct answer is option 'A'. Can you explain this answer?
Price discrimination under monopoly depends on?
a)
Elasticity of demand for the commodity
b)
Taxes and other overhead expenses
c)
Elasticity of supply for the commodity
d)
The size of the market where he sells
|
|
Gaurav Kumar answered |
The monopolist has control over pricing, demand, and supply decisions, thus, sets prices in a way, so that maximum profit can be earned. The monopolist often charges different prices from different consumers for the same product. This practice of charging different prices for identical product is called price discrimination. And in monopoly it is decided by the change in the demand of the product.
A monopolist is a price
- a)Acceptor
- b)Taker
- c)Giver
- d)Maker
Correct answer is option 'D'. Can you explain this answer?
A monopolist is a price
a)
Acceptor
b)
Taker
c)
Giver
d)
Maker
|
Naveen Choudhary answered |
Monopolist as a Price Maker
A monopolist is a price maker because it has the power to set the price for its product or service. Unlike a price taker, which is a firm in a perfectly competitive market that has no control over the price, a monopolist has the ability to determine the price based on its own market power.
1. Definition of a Monopolist:
- A monopolist is a single seller or producer in a market with no close substitutes for its product or service.
- It has complete control over the supply of the product and can restrict or manipulate the quantity supplied to influence the price.
2. Market Power:
- Market power refers to the ability of a firm to control the market price of its product or service.
- A monopolist has significant market power because it faces no competition and can set the price at a level that maximizes its own profits.
3. Price Determination:
- As a price maker, a monopolist can choose any price it desires.
- It can set a high price to maximize its profits, or it can set a lower price to increase market share and discourage potential competitors from entering the market.
- The monopolist's goal is to find the price and quantity combination that maximizes its profits.
4. Demand and Marginal Revenue:
- In order to determine the price, a monopolist must analyze the market demand for its product.
- The monopolist faces a downward-sloping demand curve, meaning that as it increases the quantity supplied, the price it can charge decreases.
- The marginal revenue, which is the change in total revenue resulting from a one-unit change in quantity sold, is also important in price determination.
- The monopolist will set the price at the quantity where marginal revenue equals marginal cost, as this maximizes its profits.
5. Benefits and Drawbacks:
- Being a price maker can be advantageous for a monopolist as it allows them to earn higher profits compared to firms in competitive markets.
- However, it also gives them the ability to exploit consumers by charging higher prices and limiting choices.
- This lack of competition can lead to inefficiencies and reduced consumer welfare.
In conclusion, a monopolist is a price maker because it has the power to set the price for its product or service based on its market power. It can determine the price that maximizes its own profits and has significant control over the market. However, this market power can also lead to negative consequences for consumers and the overall market efficiency.
A monopolist is a price maker because it has the power to set the price for its product or service. Unlike a price taker, which is a firm in a perfectly competitive market that has no control over the price, a monopolist has the ability to determine the price based on its own market power.
1. Definition of a Monopolist:
- A monopolist is a single seller or producer in a market with no close substitutes for its product or service.
- It has complete control over the supply of the product and can restrict or manipulate the quantity supplied to influence the price.
2. Market Power:
- Market power refers to the ability of a firm to control the market price of its product or service.
- A monopolist has significant market power because it faces no competition and can set the price at a level that maximizes its own profits.
3. Price Determination:
- As a price maker, a monopolist can choose any price it desires.
- It can set a high price to maximize its profits, or it can set a lower price to increase market share and discourage potential competitors from entering the market.
- The monopolist's goal is to find the price and quantity combination that maximizes its profits.
4. Demand and Marginal Revenue:
- In order to determine the price, a monopolist must analyze the market demand for its product.
- The monopolist faces a downward-sloping demand curve, meaning that as it increases the quantity supplied, the price it can charge decreases.
- The marginal revenue, which is the change in total revenue resulting from a one-unit change in quantity sold, is also important in price determination.
- The monopolist will set the price at the quantity where marginal revenue equals marginal cost, as this maximizes its profits.
5. Benefits and Drawbacks:
- Being a price maker can be advantageous for a monopolist as it allows them to earn higher profits compared to firms in competitive markets.
- However, it also gives them the ability to exploit consumers by charging higher prices and limiting choices.
- This lack of competition can lead to inefficiencies and reduced consumer welfare.
In conclusion, a monopolist is a price maker because it has the power to set the price for its product or service based on its market power. It can determine the price that maximizes its own profits and has significant control over the market. However, this market power can also lead to negative consequences for consumers and the overall market efficiency.
This a MCQ (Multiple Choice Question) based practice test of Chapter 6 - Non-Competitive Markets of Economics of Class XII (12) for the quick revision/preparation of School Board examinationsQ Which of the following is not the feature of an imperfect competition?- a)Large number of buyers
- b)Single seller
- c)Homogeneous products
- d)Price maker
Correct answer is option 'C'. Can you explain this answer?
This a MCQ (Multiple Choice Question) based practice test of Chapter 6 - Non-Competitive Markets of Economics of Class XII (12) for the quick revision/preparation of School Board examinations
Q Which of the following is not the feature of an imperfect competition?
a)
Large number of buyers
b)
Single seller
c)
Homogeneous products
d)
Price maker
|
|
Arun Khanna answered |
A homogeneous product is one that cannot be distinguished from competing products from different suppliers. In other words, the product has essentially the same physical characteristics and quality as similar products from other suppliers. One product can easily be substituted for the other.
In monopolistic competition the goods are- a)Durable
- b)Differentiated
- c)Heterogeneous
- d)Homogeneous
Correct answer is option 'B'. Can you explain this answer?
In monopolistic competition the goods are
a)
Durable
b)
Differentiated
c)
Heterogeneous
d)
Homogeneous
|
|
Alok Mehta answered |
The correct answer is b) Differentiated.
In monopolistic competition, firms produce goods that are similar but not identical. These goods are known as differentiated goods, as they have some unique features or characteristics that differentiate them from the products of other firms. As a result, consumers may perceive these goods as being slightly different from one another, even though they are in the same general product category. In this market structure, firms have some control over the prices they charge for their goods, but not as much as in a pure monopoly. Monopolistic competition is characterized by a large number of firms, easy entry and exit, and significant non-price competition.
Average revenue for any quantity level can be measured by the slope of the total revenue curve.- a)False
- b)True
- c)Can’t say
- d)None of these
Correct answer is option 'B'. Can you explain this answer?
Average revenue for any quantity level can be measured by the slope of the total revenue curve.
a)
False
b)
True
c)
Can’t say
d)
None of these
|
|
Gaurav Kumar answered |
Average revenue for any quantity level can be measured by the slope of the line from the origin to the relevant point on the total revenue curve.
MR = ∆TR/∆Q
∆TR/∆Q indicates the slope of the total revenue curve.
Thus, if the total revenue curve is given to us, we can find out marginal revenue at various levels of output by measuring the slopes at the corresponding points on the total revenue curve.
MR = ∆TR/∆Q
∆TR/∆Q indicates the slope of the total revenue curve.
Thus, if the total revenue curve is given to us, we can find out marginal revenue at various levels of output by measuring the slopes at the corresponding points on the total revenue curve.
Which of the following is the most competitive market structure?- a)Perfect competition
- b)Monopolistic competition
- c)Oligopoly
- d)Monopoly
Correct answer is option 'A'. Can you explain this answer?
Which of the following is the most competitive market structure?
a)
Perfect competition
b)
Monopolistic competition
c)
Oligopoly
d)
Monopoly
|
Isha Ahuja answered |
The most competitive market structure is perfect competition.
Perfect Competition:
Perfect competition is a market structure where there are many small firms, all producing homogeneous products. In perfect competition, there are no barriers to entry or exit, and all firms have perfect information about prices and costs. The market is said to be in equilibrium when the price is equal to the marginal cost of production.
Why is Perfect Competition the Most Competitive Market Structure?
1. Large number of buyers and sellers: In perfect competition, there are many buyers and sellers, and no one firm can dominate the market. This means that no single buyer or seller can influence the market price.
2. Homogeneous products: In perfect competition, all firms produce the same product, and consumers can easily switch from one firm to another based on price alone. This means that firms have no control over the price of their products.
3. Perfect information: In perfect competition, all firms have perfect information about prices and costs. This means that firms cannot charge higher prices than their competitors, as consumers will simply switch to a cheaper alternative.
4. No barriers to entry or exit: In perfect competition, there are no barriers to entry or exit, and new firms can enter or exit the market freely. This means that there is always competition, and firms cannot earn excessive profits in the long run.
Conclusion:
Overall, perfect competition is the most competitive market structure because it ensures that no single firm can dominate the market, and all firms are forced to compete on price alone. This results in the most efficient allocation of resources and the lowest possible prices for consumers.
Perfect Competition:
Perfect competition is a market structure where there are many small firms, all producing homogeneous products. In perfect competition, there are no barriers to entry or exit, and all firms have perfect information about prices and costs. The market is said to be in equilibrium when the price is equal to the marginal cost of production.
Why is Perfect Competition the Most Competitive Market Structure?
1. Large number of buyers and sellers: In perfect competition, there are many buyers and sellers, and no one firm can dominate the market. This means that no single buyer or seller can influence the market price.
2. Homogeneous products: In perfect competition, all firms produce the same product, and consumers can easily switch from one firm to another based on price alone. This means that firms have no control over the price of their products.
3. Perfect information: In perfect competition, all firms have perfect information about prices and costs. This means that firms cannot charge higher prices than their competitors, as consumers will simply switch to a cheaper alternative.
4. No barriers to entry or exit: In perfect competition, there are no barriers to entry or exit, and new firms can enter or exit the market freely. This means that there is always competition, and firms cannot earn excessive profits in the long run.
Conclusion:
Overall, perfect competition is the most competitive market structure because it ensures that no single firm can dominate the market, and all firms are forced to compete on price alone. This results in the most efficient allocation of resources and the lowest possible prices for consumers.
Which of the following is not a characteristic feature of imperfect competition?- a)Prices vary from seller to seller
- b)All the products are homogeneous
- c)Profits of the seller is included in the price
- d)None of above
Correct answer is option 'B'. Can you explain this answer?
Which of the following is not a characteristic feature of imperfect competition?
a)
Prices vary from seller to seller
b)
All the products are homogeneous
c)
Profits of the seller is included in the price
d)
None of above
|
|
Aryan Khanna answered |
Imperfect competition is a competitive market situation where there are many sellers, but they are selling heterogeneous (dissimilar) goods as opposed to the perfect competitive market scenario. As the name suggests, competitive markets that are imperfect in nature.
Which market have characteristic of product differentiation- a)Monopolistic competition
- b)Oligopoly
- c)Monopoly
- d)Perfect competition
Correct answer is option 'A'. Can you explain this answer?
Which market have characteristic of product differentiation
a)
Monopolistic competition
b)
Oligopoly
c)
Monopoly
d)
Perfect competition
|
|
Ræjü Bhåì answered |
Monopolistic competition characterizes
A firm practicing price discrimination will be?- a)Charges different prices for different qualities of product.
- b)Buying from one market and selling it in another market.
- c)Buying only from firms selling in bulk at a discount.
- d)Charging different prices in different markets for a product.
Correct answer is option 'D'. Can you explain this answer?
A firm practicing price discrimination will be?
a)
Charges different prices for different qualities of product.
b)
Buying from one market and selling it in another market.
c)
Buying only from firms selling in bulk at a discount.
d)
Charging different prices in different markets for a product.
|
Raghav Shah answered |
Price Discrimination Explanation:
Price discrimination is a pricing strategy where a firm charges different prices for the same product in different markets or to different customers. This allows the firm to capture more consumer surplus and maximize profits by charging higher prices to those willing to pay more.
Explanation of Option D:
- Charging different prices in different markets for a product: This is a characteristic of price discrimination where a firm sets different prices for the same product in different markets based on the willingness of customers to pay. This strategy helps the firm maximize profits by catering to varying levels of demand and price sensitivity in different markets.
Examples of Price Discrimination:
- Airlines often practice price discrimination by charging different prices for the same seat based on factors such as time of booking, demand, and passenger preferences.
- Software companies offer different pricing tiers for their products based on features and usage levels, targeting different customer segments like individuals, small businesses, and enterprises.
Benefits of Price Discrimination:
- Increases revenue by capturing consumer surplus.
- Helps in segmenting markets and targeting different customer groups.
- Maximizes profits by extracting the maximum willingness to pay from customers.
Conclusion:
Price discrimination is a common strategy used by firms to optimize pricing and maximize profits by charging different prices in different markets or to different customers. It allows firms to cater to diverse customer needs and preferences while extracting the maximum value from each market segment.
Price discrimination is a pricing strategy where a firm charges different prices for the same product in different markets or to different customers. This allows the firm to capture more consumer surplus and maximize profits by charging higher prices to those willing to pay more.
Explanation of Option D:
- Charging different prices in different markets for a product: This is a characteristic of price discrimination where a firm sets different prices for the same product in different markets based on the willingness of customers to pay. This strategy helps the firm maximize profits by catering to varying levels of demand and price sensitivity in different markets.
Examples of Price Discrimination:
- Airlines often practice price discrimination by charging different prices for the same seat based on factors such as time of booking, demand, and passenger preferences.
- Software companies offer different pricing tiers for their products based on features and usage levels, targeting different customer segments like individuals, small businesses, and enterprises.
Benefits of Price Discrimination:
- Increases revenue by capturing consumer surplus.
- Helps in segmenting markets and targeting different customer groups.
- Maximizes profits by extracting the maximum willingness to pay from customers.
Conclusion:
Price discrimination is a common strategy used by firms to optimize pricing and maximize profits by charging different prices in different markets or to different customers. It allows firms to cater to diverse customer needs and preferences while extracting the maximum value from each market segment.
Under which market conditions firms make only Normal profit in the long run- a)Oligopoly
- b)Monopoly
- c)Duopoly
- d)Monopolistic Competition
Correct answer is option 'D'. Can you explain this answer?
Under which market conditions firms make only Normal profit in the long run
a)
Oligopoly
b)
Monopoly
c)
Duopoly
d)
Monopolistic Competition
|
|
Rohini Desai answered |
Market Conditions for Normal Profit in the Long Run
In the long run, firms tend to make normal profit under certain market conditions. Let's explore these conditions in detail:
1. Monopolistic Competition:
- Monopolistic competition is a market structure characterized by a large number of firms producing differentiated products.
- In this market structure, firms have some control over the price of their product due to product differentiation.
- In the long run, firms in monopolistic competition tend to make only normal profit because of the freedom of entry and exit.
- If a firm is making above-normal profit, new firms will enter the market, increasing competition and reducing their market share and profit margins.
- Conversely, if a firm is making below-normal profit or incurring losses, some firms may exit the market, reducing competition and allowing the remaining firms to regain normal profit.
2. Oligopoly:
- Oligopoly is a market structure characterized by a few large firms dominating the market.
- The behavior of firms in oligopoly can vary, but in some cases, firms may make only normal profit in the long run.
- In an oligopolistic market, firms are interdependent, meaning they consider the actions and reactions of their competitors when making pricing and production decisions.
- If a firm in an oligopoly tries to increase its profit by raising prices, other firms may react by reducing their prices, resulting in a price war and a reduction in profit margins.
- Similarly, if a firm tries to gain a larger market share by reducing prices, other firms may respond by doing the same, leading to lower profit margins.
- This competitive dynamic often leads to firms making only normal profit in the long run.
3. Duopoly:
- Duopoly is a market structure characterized by two dominant firms operating in the market.
- The behavior of firms in a duopoly can also lead to the long-run equilibrium with normal profit.
- Similar to oligopoly, firms in a duopoly are interdependent and consider the actions and reactions of their competitor.
- If one firm in a duopoly tries to gain a competitive advantage by increasing prices or reducing prices, the other firm may respond in a way that limits the potential for above-normal profit.
- This competitive dynamic often keeps the firms in a duopoly from making excessive profit in the long run, resulting in normal profit.
4. Monopoly:
- In a monopoly, there is a single firm dominating the market with no close substitutes.
- Unlike the other market structures mentioned above, a monopoly has the potential to make above-normal profit in the long run.
- This is because a monopolistic firm has significant market power and can set prices higher than its production costs.
- However, it is important to note that the ability to make above-normal profit in the long run is not guaranteed in all monopoly situations. Factors such as government regulations, potential competition, and changes in consumer preferences can impact the long-term profitability of a monopoly.
In conclusion, firms tend to make only normal profit in the long run under market conditions such as monopolistic competition, oligopoly, and duopoly. While monopolies have the potential to make above-normal profit, it is not always the case due to various factors.
In the long run, firms tend to make normal profit under certain market conditions. Let's explore these conditions in detail:
1. Monopolistic Competition:
- Monopolistic competition is a market structure characterized by a large number of firms producing differentiated products.
- In this market structure, firms have some control over the price of their product due to product differentiation.
- In the long run, firms in monopolistic competition tend to make only normal profit because of the freedom of entry and exit.
- If a firm is making above-normal profit, new firms will enter the market, increasing competition and reducing their market share and profit margins.
- Conversely, if a firm is making below-normal profit or incurring losses, some firms may exit the market, reducing competition and allowing the remaining firms to regain normal profit.
2. Oligopoly:
- Oligopoly is a market structure characterized by a few large firms dominating the market.
- The behavior of firms in oligopoly can vary, but in some cases, firms may make only normal profit in the long run.
- In an oligopolistic market, firms are interdependent, meaning they consider the actions and reactions of their competitors when making pricing and production decisions.
- If a firm in an oligopoly tries to increase its profit by raising prices, other firms may react by reducing their prices, resulting in a price war and a reduction in profit margins.
- Similarly, if a firm tries to gain a larger market share by reducing prices, other firms may respond by doing the same, leading to lower profit margins.
- This competitive dynamic often leads to firms making only normal profit in the long run.
3. Duopoly:
- Duopoly is a market structure characterized by two dominant firms operating in the market.
- The behavior of firms in a duopoly can also lead to the long-run equilibrium with normal profit.
- Similar to oligopoly, firms in a duopoly are interdependent and consider the actions and reactions of their competitor.
- If one firm in a duopoly tries to gain a competitive advantage by increasing prices or reducing prices, the other firm may respond in a way that limits the potential for above-normal profit.
- This competitive dynamic often keeps the firms in a duopoly from making excessive profit in the long run, resulting in normal profit.
4. Monopoly:
- In a monopoly, there is a single firm dominating the market with no close substitutes.
- Unlike the other market structures mentioned above, a monopoly has the potential to make above-normal profit in the long run.
- This is because a monopolistic firm has significant market power and can set prices higher than its production costs.
- However, it is important to note that the ability to make above-normal profit in the long run is not guaranteed in all monopoly situations. Factors such as government regulations, potential competition, and changes in consumer preferences can impact the long-term profitability of a monopoly.
In conclusion, firms tend to make only normal profit in the long run under market conditions such as monopolistic competition, oligopoly, and duopoly. While monopolies have the potential to make above-normal profit, it is not always the case due to various factors.
In the case of a negatively sloping straight line demand curve, the total revenue curve is- a)A rectangular hyperbola
- b)Convex to the origin
- c)An inverted vertical parabola.
- d)Concave to the origin
Correct answer is option 'C'. Can you explain this answer?
In the case of a negatively sloping straight line demand curve, the total revenue curve is
a)
A rectangular hyperbola
b)
Convex to the origin
c)
An inverted vertical parabola.
d)
Concave to the origin
|
Mansi Mukherjee answered |
Total Revenue Curve for a Negatively Sloping Straight Line Demand Curve
A demand curve shows the relationship between the price of a product and the quantity demanded by consumers. If the demand curve is a straight line with a negative slope, it means that as the price of the product increases, the quantity demanded decreases. In this case, the total revenue curve will have a specific shape, which is an inverted vertical parabola. Let's understand this concept in detail.
Definition of Total Revenue
Total revenue is the total amount of money earned by a company by selling its products. It is calculated by multiplying the price of a product with the quantity sold. Mathematically, we can represent it as:
Total Revenue = Price x Quantity
Shape of Total Revenue Curve
The shape of the total revenue curve depends on the slope of the demand curve. If the demand curve is perfectly elastic, which means that the quantity demanded changes infinitely for a small change in price, the total revenue curve will be a horizontal line. On the other hand, if the demand curve is perfectly inelastic, which means that the quantity demanded remains the same irrespective of the change in price, the total revenue curve will be a vertical line.
However, in the case of a negatively sloping straight line demand curve, the shape of the total revenue curve is unique. When the price of a product is high, the quantity demanded is low, and hence the total revenue earned is also low. Similarly, when the price of a product is low, the quantity demanded is high, and hence the total revenue earned is also low. Therefore, the total revenue curve reaches its maximum point at the midpoint of the demand curve, where the price and quantity are both moderate. As we move away from the midpoint, the total revenue curve starts to fall.
The shape of the total revenue curve in this case is an inverted vertical parabola because it has a maximum point at the top and slopes downwards on both sides. It is concave to the origin because the rate of change of total revenue decreases as we move away from the midpoint.
Conclusion
In conclusion, the shape of the total revenue curve for a negatively sloping straight line demand curve is an inverted vertical parabola, which is concave to the origin. The maximum point of the curve is at the midpoint of the demand curve, where the price and quantity are both moderate. As we move away from the midpoint, the total revenue curve starts to fall.
A demand curve shows the relationship between the price of a product and the quantity demanded by consumers. If the demand curve is a straight line with a negative slope, it means that as the price of the product increases, the quantity demanded decreases. In this case, the total revenue curve will have a specific shape, which is an inverted vertical parabola. Let's understand this concept in detail.
Definition of Total Revenue
Total revenue is the total amount of money earned by a company by selling its products. It is calculated by multiplying the price of a product with the quantity sold. Mathematically, we can represent it as:
Total Revenue = Price x Quantity
Shape of Total Revenue Curve
The shape of the total revenue curve depends on the slope of the demand curve. If the demand curve is perfectly elastic, which means that the quantity demanded changes infinitely for a small change in price, the total revenue curve will be a horizontal line. On the other hand, if the demand curve is perfectly inelastic, which means that the quantity demanded remains the same irrespective of the change in price, the total revenue curve will be a vertical line.
However, in the case of a negatively sloping straight line demand curve, the shape of the total revenue curve is unique. When the price of a product is high, the quantity demanded is low, and hence the total revenue earned is also low. Similarly, when the price of a product is low, the quantity demanded is high, and hence the total revenue earned is also low. Therefore, the total revenue curve reaches its maximum point at the midpoint of the demand curve, where the price and quantity are both moderate. As we move away from the midpoint, the total revenue curve starts to fall.
The shape of the total revenue curve in this case is an inverted vertical parabola because it has a maximum point at the top and slopes downwards on both sides. It is concave to the origin because the rate of change of total revenue decreases as we move away from the midpoint.
Conclusion
In conclusion, the shape of the total revenue curve for a negatively sloping straight line demand curve is an inverted vertical parabola, which is concave to the origin. The maximum point of the curve is at the midpoint of the demand curve, where the price and quantity are both moderate. As we move away from the midpoint, the total revenue curve starts to fall.
The AR curve and industry demand curve are same in case of?- a)Monopoly
- b)Perfect competition
- c)Oligopoly
- d)None of above
Correct answer is option 'A'. Can you explain this answer?
The AR curve and industry demand curve are same in case of?
a)
Monopoly
b)
Perfect competition
c)
Oligopoly
d)
None of above
|
Navya Sengupta answered |
In a monopoly market, there is only one product or service of such kind, therefore the demand of the product is not affected by any external force which means the AR will remain same as the Demand.
Selling cost is the feature of- a)Perfect competition
- b)Monopolistic competition
- c)Monopoly
- d)Bilateral monopoly
Correct answer is option 'B'. Can you explain this answer?
Selling cost is the feature of
a)
Perfect competition
b)
Monopolistic competition
c)
Monopoly
d)
Bilateral monopoly
|
|
Nidhi Chakraborty answered |
Selling cost is the feature of Monopolistic Competition.
Explanation:
Monopolistic competition refers to a market structure where a large number of sellers offer differentiated products to buyers. In this market, each firm has a small market share and enjoys a certain degree of market power. As a result, firms engage in non-price competition to attract customers. Selling cost is an important feature of monopolistic competition. It refers to the expenses incurred by firms to promote their products and differentiate them from their competitors.
Importance of Selling Cost:
Selling cost is a significant factor in monopolistic competition because it helps firms to increase their sales and profits. By spending on advertising, packaging, branding, and other promotional activities, firms can create a unique identity for their products and attract loyal customers. This, in turn, can lead to higher market share and increased profits for the firm. Therefore, selling cost is an essential strategy for firms in monopolistic competition to differentiate themselves from their competitors and increase their market power.
Examples:
Examples of firms that incur high selling costs in monopolistic competition include Coca-Cola, Nike, and Apple. These firms spend a considerable amount of money on advertising, branding, and packaging to promote their products and create a unique identity in the market. By doing so, they can attract loyal customers who are willing to pay a premium price for their products.
Conclusion:
In conclusion, selling cost is a crucial feature of monopolistic competition. It helps firms to differentiate themselves from their competitors, increase their market power, and attract loyal customers. Therefore, firms in monopolistic competition should focus on investing in selling costs to increase their sales and profits.
Explanation:
Monopolistic competition refers to a market structure where a large number of sellers offer differentiated products to buyers. In this market, each firm has a small market share and enjoys a certain degree of market power. As a result, firms engage in non-price competition to attract customers. Selling cost is an important feature of monopolistic competition. It refers to the expenses incurred by firms to promote their products and differentiate them from their competitors.
Importance of Selling Cost:
Selling cost is a significant factor in monopolistic competition because it helps firms to increase their sales and profits. By spending on advertising, packaging, branding, and other promotional activities, firms can create a unique identity for their products and attract loyal customers. This, in turn, can lead to higher market share and increased profits for the firm. Therefore, selling cost is an essential strategy for firms in monopolistic competition to differentiate themselves from their competitors and increase their market power.
Examples:
Examples of firms that incur high selling costs in monopolistic competition include Coca-Cola, Nike, and Apple. These firms spend a considerable amount of money on advertising, branding, and packaging to promote their products and create a unique identity in the market. By doing so, they can attract loyal customers who are willing to pay a premium price for their products.
Conclusion:
In conclusion, selling cost is a crucial feature of monopolistic competition. It helps firms to differentiate themselves from their competitors, increase their market power, and attract loyal customers. Therefore, firms in monopolistic competition should focus on investing in selling costs to increase their sales and profits.
The demand curve of a monopoly firm will be:- a)Vertical
- b)Straight line
- c)Downward sloping
- d)Upward sloping
Correct answer is option 'C'. Can you explain this answer?
The demand curve of a monopoly firm will be:
a)
Vertical
b)
Straight line
c)
Downward sloping
d)
Upward sloping
|
|
Rohini Desai answered |
Demand Curve of a Monopoly Firm
A monopoly firm is the sole producer of a product or service in the market, giving it the power to set prices and control the quantity supplied. The demand curve for a monopoly firm will be:
- Downward sloping: The demand curve of a monopoly firm is always downward sloping.
- Explanation: This is because a monopoly firm has control over the market and can influence the price. As the monopolist increases the price of its product, the quantity demanded by consumers decreases. Conversely, if the monopolist lowers the price, the quantity demanded increases.
- Reasons for downward sloping demand curve:
- No close substitutes: In a monopoly, there are no close substitutes available for the monopolist's product, so consumers have limited options.
- Market power: The monopolist has market power and can influence the price, leading to a negative relationship between price and quantity demanded.
- Barriers to entry: Monopoly firms often have barriers to entry, such as patents, high startup costs, or exclusive control over resources, which limit competition and allow them to maintain their market power.
Therefore, the correct answer is C: Downward sloping.
Market which has two firms is known as- a)Duopoly
- b)Monopolistic Competition
- c)Oligopoly
- d)None of These
Correct answer is option 'A'. Can you explain this answer?
Market which has two firms is known as
a)
Duopoly
b)
Monopolistic Competition
c)
Oligopoly
d)
None of These
|
|
Alok Mehta answered |
Oligopoly is a market structure with a small number of firms, none of which can keep the others from having significant influence. The concentration ratio measures the market share of the largest firms. A monopoly is one firm, duopoly is two firms and oligopoly is two or more firms.
The market structure in which the number of sellers is small and there is interdependence in decision making by the firms is known as- a)Oligopoly
- b)Monopolistic competition
- c)Monopoly
- d)Perfect competition
Correct answer is option 'A'. Can you explain this answer?
The market structure in which the number of sellers is small and there is interdependence in decision making by the firms is known as
a)
Oligopoly
b)
Monopolistic competition
c)
Monopoly
d)
Perfect competition
|
|
Ankit Chakraborty answered |
Explanation:
Oligopoly:
- Oligopoly is a market structure in which a small number of firms dominate the market.
- The number of sellers is small in an oligopoly, leading to intense competition among them.
- In an oligopoly, firms often have to consider the reactions of their competitors when making decisions about pricing, marketing strategies, and product development.
- Firms in an oligopoly are interdependent, meaning that the actions of one firm can have a significant impact on the others.
- This interdependence leads to strategic interactions among firms, such as price wars, collusion, and non-price competition.
Comparison with Other Market Structures:
- Monopolistic competition is a market structure with many sellers offering differentiated products. In monopolistic competition, firms have some degree of market power but do not face the same level of interdependence as in an oligopoly.
- Monopoly is a market structure in which a single firm dominates the market and has significant market power. In a monopoly, there is no competition from other firms.
- Perfect competition is a market structure with many sellers offering identical products. In perfect competition, firms are price takers and do not have any market power.
Conclusion:
- In conclusion, oligopoly is characterized by a small number of sellers and interdependence in decision making. Firms in an oligopoly must consider the actions of their competitors when making strategic decisions, leading to complex and dynamic market interactions.
Oligopoly:
- Oligopoly is a market structure in which a small number of firms dominate the market.
- The number of sellers is small in an oligopoly, leading to intense competition among them.
- In an oligopoly, firms often have to consider the reactions of their competitors when making decisions about pricing, marketing strategies, and product development.
- Firms in an oligopoly are interdependent, meaning that the actions of one firm can have a significant impact on the others.
- This interdependence leads to strategic interactions among firms, such as price wars, collusion, and non-price competition.
Comparison with Other Market Structures:
- Monopolistic competition is a market structure with many sellers offering differentiated products. In monopolistic competition, firms have some degree of market power but do not face the same level of interdependence as in an oligopoly.
- Monopoly is a market structure in which a single firm dominates the market and has significant market power. In a monopoly, there is no competition from other firms.
- Perfect competition is a market structure with many sellers offering identical products. In perfect competition, firms are price takers and do not have any market power.
Conclusion:
- In conclusion, oligopoly is characterized by a small number of sellers and interdependence in decision making. Firms in an oligopoly must consider the actions of their competitors when making strategic decisions, leading to complex and dynamic market interactions.
The demand curve of oligopoly is?- a)Kinked
- b)Vertical
- c)Horizontal
- d)Rising left to right
Correct answer is option 'A'. Can you explain this answer?
The demand curve of oligopoly is?
a)
Kinked
b)
Vertical
c)
Horizontal
d)
Rising left to right
|
|
Athira Gupta answered |
The Demand Curve of Oligopoly
Oligopoly is a market structure characterized by a small number of large firms that dominate the market. In an oligopoly, each firm's pricing and output decisions are influenced by the actions of its competitors. As a result, the demand curve faced by an oligopolistic firm is different from that faced by firms in perfect competition or monopoly.
1. Kinked Demand Curve
The demand curve of an oligopoly is often referred to as a kinked demand curve. This is because the demand curve has a distinct kink or bend at the current market price. The kinked demand curve assumes that firms in an oligopoly are mutually interdependent and are aware of each other's actions.
2. Explanation of the Kinked Demand Curve
The kinked demand curve is based on the assumption that firms in an oligopoly are reluctant to change their prices. If a firm increases its price, it fears losing market share to its competitors, as consumers may switch to lower-priced substitutes. However, if a firm decreases its price, it expects its competitors to follow suit, resulting in a price war and lower profits for all firms.
3. The Upper and Lower Portions of the Demand Curve
The kinked demand curve has two distinct portions: the upper portion and the lower portion.
- The upper portion of the demand curve is relatively elastic. This means that if a firm increases its price above the kink, it will face a relatively elastic demand. This is because consumers are sensitive to price changes and will switch to lower-priced substitutes.
- The lower portion of the demand curve is relatively inelastic. If a firm decreases its price below the kink, it will face a relatively inelastic demand. This is because consumers are less likely to switch to higher-priced substitutes, as they perceive the lower price as a temporary or promotional offer.
4. Implications of the Kinked Demand Curve
The kinked demand curve has several implications for the behavior of oligopolistic firms:
- Price rigidity: The kinked demand curve suggests that firms in an oligopoly are likely to maintain their current price due to the fear of retaliation from competitors. This leads to price rigidity in the market.
- Non-price competition: Instead of competing on price, oligopolistic firms often engage in non-price competition, such as advertising, product differentiation, and customer service, to gain a competitive advantage.
- Uncertainty: The kinked demand curve introduces uncertainty into the oligopolistic market. Firms are uncertain about how their competitors will react to their price changes, making it difficult to predict market outcomes.
Conclusion
In conclusion, the demand curve of an oligopoly is kinked due to the interdependence and strategic behavior of firms in the market. The kinked demand curve reflects the reluctance of firms to change their prices and the potential for retaliatory actions by competitors. This leads to price rigidity and non-price competition in the oligopolistic market.
Oligopoly is a market structure characterized by a small number of large firms that dominate the market. In an oligopoly, each firm's pricing and output decisions are influenced by the actions of its competitors. As a result, the demand curve faced by an oligopolistic firm is different from that faced by firms in perfect competition or monopoly.
1. Kinked Demand Curve
The demand curve of an oligopoly is often referred to as a kinked demand curve. This is because the demand curve has a distinct kink or bend at the current market price. The kinked demand curve assumes that firms in an oligopoly are mutually interdependent and are aware of each other's actions.
2. Explanation of the Kinked Demand Curve
The kinked demand curve is based on the assumption that firms in an oligopoly are reluctant to change their prices. If a firm increases its price, it fears losing market share to its competitors, as consumers may switch to lower-priced substitutes. However, if a firm decreases its price, it expects its competitors to follow suit, resulting in a price war and lower profits for all firms.
3. The Upper and Lower Portions of the Demand Curve
The kinked demand curve has two distinct portions: the upper portion and the lower portion.
- The upper portion of the demand curve is relatively elastic. This means that if a firm increases its price above the kink, it will face a relatively elastic demand. This is because consumers are sensitive to price changes and will switch to lower-priced substitutes.
- The lower portion of the demand curve is relatively inelastic. If a firm decreases its price below the kink, it will face a relatively inelastic demand. This is because consumers are less likely to switch to higher-priced substitutes, as they perceive the lower price as a temporary or promotional offer.
4. Implications of the Kinked Demand Curve
The kinked demand curve has several implications for the behavior of oligopolistic firms:
- Price rigidity: The kinked demand curve suggests that firms in an oligopoly are likely to maintain their current price due to the fear of retaliation from competitors. This leads to price rigidity in the market.
- Non-price competition: Instead of competing on price, oligopolistic firms often engage in non-price competition, such as advertising, product differentiation, and customer service, to gain a competitive advantage.
- Uncertainty: The kinked demand curve introduces uncertainty into the oligopolistic market. Firms are uncertain about how their competitors will react to their price changes, making it difficult to predict market outcomes.
Conclusion
In conclusion, the demand curve of an oligopoly is kinked due to the interdependence and strategic behavior of firms in the market. The kinked demand curve reflects the reluctance of firms to change their prices and the potential for retaliatory actions by competitors. This leads to price rigidity and non-price competition in the oligopolistic market.
A monopoly structure must have one seller, has no substitute, and entry into the industry is preventeD.- a)True
- b)False
- c)Can’t say
- d)None of these
Correct answer is option 'A'. Can you explain this answer?
A monopoly structure must have one seller, has no substitute, and entry into the industry is preventeD.
a)
True
b)
False
c)
Can’t say
d)
None of these
|
|
Mehul Mukherjee answered |
- A market structure is characterized by a single seller, selling a unique product in the market. In a monopoly market, the seller faces no competition, as he is the sole seller of goods with no close substitute.
- In a monopoly market, factors like government license, ownership of resources, copyright and patent and high starting cost make an entity a single seller of goods. All these factors restrict the entry of other sellers into the market. Monopolies also possess some information that is not known to other sellers.
- In a monopoly market, factors like government license, ownership of resources, copyright and patent and high starting cost make an entity a single seller of goods. All these factors restrict the entry of other sellers into the market. Monopolies also possess some information that is not known to other sellers.
In perfect competition the goods are- a)Durable
- b)Homogeneous
- c)Differentiated
- d)Heterogeneous
Correct answer is option 'B'. Can you explain this answer?
In perfect competition the goods are
a)
Durable
b)
Homogeneous
c)
Differentiated
d)
Heterogeneous
|
Manisha Patel answered |
Introduction:
Perfect competition is a market structure where a large number of buyers and sellers trade homogeneous goods at a uniform price. In this scenario, the correct answer is option 'B' - Homogeneous goods. Let's understand why the goods in perfect competition are considered to be homogeneous.
Explanation:
1. Definition of Perfect Competition:
Perfect competition is a market structure characterized by the following conditions:
- A large number of buyers and sellers.
- Homogeneous goods.
- Free entry and exit of firms.
- Perfect information.
- Price takers (individual firms have no control over the market price).
2. Homogeneous Goods:
In perfect competition, the goods produced and sold by different firms are considered to be homogeneous. Homogeneous goods refer to goods that are identical or indistinguishable from one another in terms of their quality, characteristics, and features. This means that consumers perceive no difference between the products offered by different sellers in terms of their physical attributes and performance.
3. Reasons for Homogeneity:
There are a few reasons why goods in perfect competition are homogeneous:
- Commoditization: In perfect competition, goods are often commoditized, meaning they are considered basic or standardized products that are easily substitutable. This leads to a lack of differentiation between products.
- Lack of Branding: In a perfectly competitive market, firms do not engage in branding or product differentiation strategies. They focus on producing and selling goods at the prevailing market price, rather than investing in branding efforts to make their products unique.
- Price Determination: In perfect competition, the market price is determined by the forces of demand and supply. Since all firms sell homogeneous goods and are price takers, they have no control over the market price. Thus, there is no incentive for firms to differentiate their products to command a higher price.
4. Implications of Homogeneity:
The homogeneity of goods in perfect competition has several implications:
- Identical prices: Since the goods are homogeneous, all sellers charge the same price for their products. This ensures that there is no price discrimination among buyers.
- Perfect substitutability: Consumers perceive no difference between the goods offered by different sellers. As a result, they can easily switch from one seller to another without experiencing any loss in utility.
- Competition based on price: In the absence of product differentiation, firms in perfect competition compete solely on the basis of price. They cannot attract customers by offering unique features or superior quality, leading to intense price competition.
Conclusion:
In perfect competition, goods are considered to be homogeneous. This means that the goods produced by different sellers are identical or indistinguishable from one another in terms of their physical attributes, quality, and performance. The homogeneity of goods in perfect competition has implications such as identical prices, perfect substitutability, and competition based solely on price.
Perfect competition is a market structure where a large number of buyers and sellers trade homogeneous goods at a uniform price. In this scenario, the correct answer is option 'B' - Homogeneous goods. Let's understand why the goods in perfect competition are considered to be homogeneous.
Explanation:
1. Definition of Perfect Competition:
Perfect competition is a market structure characterized by the following conditions:
- A large number of buyers and sellers.
- Homogeneous goods.
- Free entry and exit of firms.
- Perfect information.
- Price takers (individual firms have no control over the market price).
2. Homogeneous Goods:
In perfect competition, the goods produced and sold by different firms are considered to be homogeneous. Homogeneous goods refer to goods that are identical or indistinguishable from one another in terms of their quality, characteristics, and features. This means that consumers perceive no difference between the products offered by different sellers in terms of their physical attributes and performance.
3. Reasons for Homogeneity:
There are a few reasons why goods in perfect competition are homogeneous:
- Commoditization: In perfect competition, goods are often commoditized, meaning they are considered basic or standardized products that are easily substitutable. This leads to a lack of differentiation between products.
- Lack of Branding: In a perfectly competitive market, firms do not engage in branding or product differentiation strategies. They focus on producing and selling goods at the prevailing market price, rather than investing in branding efforts to make their products unique.
- Price Determination: In perfect competition, the market price is determined by the forces of demand and supply. Since all firms sell homogeneous goods and are price takers, they have no control over the market price. Thus, there is no incentive for firms to differentiate their products to command a higher price.
4. Implications of Homogeneity:
The homogeneity of goods in perfect competition has several implications:
- Identical prices: Since the goods are homogeneous, all sellers charge the same price for their products. This ensures that there is no price discrimination among buyers.
- Perfect substitutability: Consumers perceive no difference between the goods offered by different sellers. As a result, they can easily switch from one seller to another without experiencing any loss in utility.
- Competition based on price: In the absence of product differentiation, firms in perfect competition compete solely on the basis of price. They cannot attract customers by offering unique features or superior quality, leading to intense price competition.
Conclusion:
In perfect competition, goods are considered to be homogeneous. This means that the goods produced by different sellers are identical or indistinguishable from one another in terms of their physical attributes, quality, and performance. The homogeneity of goods in perfect competition has implications such as identical prices, perfect substitutability, and competition based solely on price.
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