PERFECT COMPETITION ILLEGAL MONOPOLY OLIGOPOLY CARTEL AND MO

(PERFECT COMPETITION, ILLEGAL MONOPOLY, OLIGOPOLY, CARTEL AND MONOPOLISTIC COMPETITION. For each statement (19) through (25) you write the name of the market form that fits the statement: 19) This market has very small firms and a homogeneous product 20) This market form has very small firms but does NOT have a homogeneous product 21) This market form has a small number of firms with big market shares 22) This market form will sell at the Socially Optimal price in the long run. 23. This market from has firms with very high start up for marketing and advertising 24. This market from will only do well in the long run, if market demand is INELASTIC. 25. This market firm has firm will excess capacity in the long run

Solution

(19) Perfect competition. In this form, there are numerous firms and each firm is small enough as not to occupy large market share to influence price.

(20) Monopolistic competition. This form is characterized by many small firms, but each have a slightly differentiated product.

(21) Oligopoly. This market has only a few firms who are large in size.

(22) Perfect competition. In this form, firms equate price with average total cost in long run, ensuring zero economic profit which results in social efficiency.

(23) Illegal Monopoly. Such huge start up costs act as barriers to entry so that only one firm exists in the market.

(24) Cartel. In a cartel, firms can set high price only if demand is inelastic and higher price results in increase in total revenue.

(25) Monopoly. In a monopoly structure, excess capacity in long run is possible.