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Perfective Competitive Markets and Monopoly Characteristics

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1a) What are the characteristics of a Perfectly Competitive Market?

1b) What are the Characteristics of a Monopoly?

1c) Discuss why the demand curve faced by a Perfect Competitor is assumed to be perfectly elastic and that of a Monopolist less elastic.

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Solution Preview

1a)

Numerous buyers and sellers
Homogeneous products
Consumers have perfect information about prices
All firms, incumbent and potential entrants alike, have equal access to resources

1b)

One firm in the industry
There are no close substitutes for the product
Entry of new firms is not feasible

1c) The ...

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