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Perfect Competition: sample question

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A representative firm with long-run total cost given by TC = 20 + 20q + 5q2 operates in a competitive industry where the short-run market demand and supply curves are given by QD = 1,602 - 40P and QS = - 400 + 20P. If it continues to operate in the long run, its profit-maximizing level of output is

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Solution Preview

First we determine the market equilibrium price.

At equilibrium, Qs = Qd, ...

$2.19
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Conditions that exist under perfectly competitive, monopolistically competitive, oligopolistic and monopoly markets; and real-life examples of each.

a) What are the conditions for a perfectly competitive market?
b) What are the conditions for a monopolistic market?
c) What are the conditions for a monopolistic competitive market?
d) What are the conditions for an oligopolistic market?
e) How would you explain the differences among these market structures? Identify which market structure your organization competes in and why you think so.
f) What are some real-life examples of monopolistically competitive, oligopoly, and monopoly markets?

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