Please provide help with short answers to the questions attached. Thank you.© BrainMass Inc. brainmass.com March 21, 2019, 5:48 pm ad1c9bdddf
(1) Pure competition occurs in a market characterized by a large number of independent sellers of standardized products, free flow of information, and free entry and exit. Each seller is a "price taker" rather than a "price maker".
Pure monopoly is a characteristic of a market in which one company has control over the entire market for a product, usually because of a barrier to entry such as a technology only available to that company.
Monopolistic competition happens in a market structure in which several or many sellers each produce similar, but slightly differentiated products. Each producer can set its price and quantity without affecting the marketplace as a whole.
Oligopoly is a trait of a market dominated by a small number of participants who are able to collectively exert control over supply and market prices.
a) Pure competition - there are lots of places where you can buy groceries and household items (gas stations, Walmart, etc.)
b) Oligopoly (within US) - steel is irreplaceable for so many industries, that it's hard to envision a switch from steel to something else.
c) Monopolistic competition - banks offer very similar products (checking, savings, etc.) yet with different perks, like different rewards programs.
d) Pure competition - airline companies have to compete with each other as well as other means of transportation (like cars, trains, buses, etc.)
(2) A company is making a normal profit when total revenues equal total costs. Normal profit is essentially a zero economic profit. An economic profit arises when the company's revenue exceeds the total cost of its inputs. These costs include the cost of equity capital (which is met by normal profits).
(3) Causes of monopoly:
- technical barriers (natural monopoly, like gas and oil companies)
- legal barriers (patenting of technology)
- decreasing cots of production and hence lowest prices
Yes, I would classify De Beer's Corp as a natural monopoly. Of course, there are competitors, but their combined level of production doesn't come even remotely close to that of De Beer's. All that is due to the fact that they own the richest natural resources.
(4) Economies of scale are usually the entry barrier that limits competition in ologopolistic markets. Auto industry is a great example of that. In the auto industry, it is difficult to start out small, and gradually grow to the optimal size, you would have to start at the ...
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