Perfect And Imperfect Competition

Question 1

Perfect competition

Answer 1

• a marketplace:
• no barriers to entry into market,
• equal market share for all suppliers
• prices set by demand and supply

Equilibrium is the price in perfect competition marketplace.

No point in supplier lowering prices because:

• already suppliers providing exact product
• no point supplier lowering prices because demand is being met

Question 2

Imperfect competition

Answer 2

Very common

• a marketplace with products and services that have different features
• a number of sellers competing for market share
• Barriers to entry preventing sellers from entering market, because regulatory requirements, high startup costs, industry expertise required
• buyers and sellers without readily available information

Question 3

Monopoly

Answer 3

• 1main supplier
• set price at whatever they want
• profitability not guaranteed as customers might not want product

Question 4

Oligopoly

Answer 4

• small number of suppliers, and prices they set impact each other.
• if a supplier raises prices, the other suppliers gain market share.
• all suppliers have to raise prices to maintain market price

Question 5

Monopolistic competition

Answer 5

• Suppliers compete with other things such as brand, expertise tomorrow increase demand for there product