Certainly! Here's the transcription of the text, suitable for an educational website:---**Lesson 5.7 – Perfect Competition vs. Monopoly**1. A perfectly competitive firm is a price _______________; whereas, a monopolist is a price _______________.2. A perfect competitive firm has a ____________________ demand curve; whereas a monopolist has a ____________________ demand curve.3. For a perfectly competitive firm, P _______ MR, but for a monopolist P _________ MR.4. A perfectly competitive firm will charge a price _________________ MC; however, a monopolist charges a price __________________ MC.5. Considering a perfectly competitive market and a monopoly market, each with the same demand and marginal cost curves, Consumers' surplus is greater in the _______________________________ market.--- This exercise is aimed at helping students understand the differences between perfect competition and monopoly market structures. The task requires filling in the blanks with the appropriate concepts or terms discussed in prior lessons.

Perfect competition refers to a market in which there is free entry and exit of firms. The commodity being produced and sold is homogeneous in nature, i.e. all firms produce a commodity of the same quality. On the other hand, monopoly refers to a single firm that produces a unique commodity that no other firm can produce. Hence, the quality and the quantity produced of the commodity depend entirely on the decision of the firm.Market structure is the classification and differentiation of industries on the basis of the degree and nature of competition for goods and services. In perfect competition, there are a large number of consumers and producers, hence the producers’ influence on the market price is insignificant and the price is determined by market forces. This indicates that if a firm decreases or increases its price it will gain or lose all respectively. Hence, firms in perfect competition are price takers.A monopolist, a producer of a unique commodity, has no competition or any close substitutes to their commodity. This indicates that they have full control over the price of their commodity. Hence, a monopoly firm is a price maker.In a perfectly competitive market small changes in price lead to extreme changes in the quantity demanded, indicating that the demand is perfectly elastic. Hence a perfectly competitive firm has a horizontal demand curve.A monopoly has complete control over the price of its commodity, indicating that it has varying prices. This further indicates that the law of demand is applicable here, i.e. an increase in the prices will lead to a decline in the quantity demanded. Hence, a monopolist has a downward-sloping demand curve.In perfect competition the prices are constant, hence the additional revenue generated from the sale of an additional unit is the same as the price. Hence, for a perfectly competitive firm, the price is equal to the marginal revenue, i.e. P=MR.In a monopoly the price changes with a change in the sale, this indicates that marginal revenue decline with additional sales. Hence, for a monopolist prices are greater than the marginal revenue, i.e. P>MR.In a perfectly competitive market, the prices are constant and firms maximize profits when their marginal revenue is equal to their marginal cost. Hence, due to constant prices, the marginal revenue is equal to the price since additional revenue generated from the sale of one more unit is the price of one unit. To maximize profits, firms operate at the point where MR=MC, and since P=MR implies that P=MC.A monopolist maximizes profits when its marginal revenue is equal to its marginal cost. The price, in a monopoly, changes with each additional output sold, hence due to diminishing returns the marginal revenue declines. Hence, for a monopolist prices are more than the marginal revenue. Hence, when a monopolist operates at the point where MR=MC its prices are more than the marginal revenue, i.e. P>MR, this implies that P>MC.A monopolist charges a price higher than the equilibrium price, i.e. the point where marginal revenue is equal to the marginal cost, unlike the perfectly competitive firms. Hence, in a case where both, a perfectly competitive market and a monopoly, have the same demand and marginal cost curves, the consumer surplus will be greater in the perfectly competitive, due to higher prices in a monopoly.

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1. A perfectly competitive firm is a price 2. A perfect competitive firm has a demand curve. ; whereas, a monopolist is a price demand curve; whereas a monopolist has a 3. For a perfectly competitive firm, P 4. A perfectly competitive firm will charge a price MC. 5. Considering a perfectly competitive market and a monopoly market, each with the same demand and marginal cost curves, Consumers' surplus is greater in the market. MR. MC; however, a monopolist charges a price MR, but for a monopolist P

1. A perfectly competitive firm is a price 2. A perfect competitive firm has a demand curve. ; whereas, a monopolist is a price demand curve; whereas a monopolist has a 3. For a perfectly competitive firm, P 4. A perfectly competitive firm will charge a price MC. 5. Considering a perfectly competitive market and a monopoly market, each with the same demand and marginal cost curves, Consumers' surplus is greater in the market. MR. MC; however, a monopolist charges a price MR, but for a monopolist P

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Answer Q 4
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