Imperfect Competition

ntroduction Imperfect competitive market refers to a market structure where at least one agent among buyers and sellers, has the power to affect the equilibrium price and quantity. The four different types of imperfect competitive markets are monopoly, monopolistic competition, oligopoly and monopsony. Monopoly is a market structure where a single firm sells goods or services to a large number of buyers as no close substitutes are available. The main features of monopoly market structure are: Single seller and large number of buyers, Restriction on entry of new firms, No close substitutes, Full control over prices, etc. Monopolistic competition is found in the industry where there is large number of small sellers, selling differentiated but close substitute products. The different features of monopolistic competition are product differentiation, large number of firms, free entry and free exit of firms, non-price competition, elastic demand curve, etc. A market structure in which there are a few firms in industry producing either homogeneous products or closely differentiated products is called oligopoly. The different features of oligopoly market structure are as follows: Few firms Large number of buyers High degree of interdependence Entry barriers Selling cost Formation of cartels The difference between various market structures can be viewed in terms of number of sellers, entry and exit of firms, nature of product, nature of profit, etc. Equilibrium condition of the firm can be studied under two approaches: Total revenue and total cost approach Marginal revenue and marginal cost approach Monopsony is a market situation in which there is only one buyer of a product or factor and there are many sellers. The main features of monopsony are Single Buyer, Large number of Sellers, Specialised product or input, lack of mobility, etc.

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  • Q1

    MR is less than AR in a monopoly firm because

    Marks:1
    Answer:

    more is sold by lowering price

    Explanation:

    Monopoly is a market situation where a single firm sells goods or services to a large number of buyers as no close substitutes are available. Thus, under monopoly firm can sell more only by lowering the price of a commodity. Decreasing price(AR) implies decreasing MR.

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  • Q2

    The distinguishing feature of monopolistic competition is

    Marks:1
    Answer:

    Product differentiation

    Explanation:

    Product differentiation is the main distinguishing feature of a monopolistic market. Products are differentiated from one another on the basis of brand ,name, colour, shape, quality etc. The commodities sold have close substitutes available in the market. For example: shampoo brands in India.

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  • Q3

    Few firms is the characterstic of

    Marks:1
    Answer:

    oligopoly.

    Explanation:

    Oligopoly is a market structure in which there are a few firms in industry producing either homogeneous products or closely differentiated products.

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  • Q4

    The number of firms in a monopoly market are

    Marks:1
    Answer:

    one.

    Explanation:
    Only one firm is present in the  monopoly market. Monopoly is the firm where there is a single firm selling the commodity and there is no close substitute of the commodity sold by the monopolist.
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  • Q5

    In which form of market price discrimination is possible?

    Marks:1
    Answer:

    Monopoly

    Explanation:

    Price discrimination means charging different prices from different customers which is possible only under monopoly market. As, in monopoly market there is single seller of the commodity with no close substitutes. So, the producer is the price maker which means price is decided by the suppliers and the consumer has to accept the price.

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