Supply And Demand

Question 1

Perfect competition characteristics

Answer 1

Many buyers and sellers
Homogeneous products
Price is the market price= marginal revenues =marginal costs (for maximum profit)

Short run= firms earn profits or losses

Free entry drives long run profits to zero

Question 2

Monopolistic markets characteristics

Answer 2

Few sellers
Different products
Companies define price or quantity, not both
Charges a price higher than its marginal costs
Profits continue of firm maintain monopoly
Economy of scale: quantity produced affects long run average costs
Economy of scope: produce more than one product

Question 3

Monopolistic competition

Characteristics

Answer 3

Many sellers
Slightly different products 
Sellers set price for its own product 
Free entry and exit
Price is higher than marginal costs
No profits due to free entry

Question 4

Oligopoly characteristics

Answer 4

Few sellers
Some control of the market
Not always in aggressive competition

Question 5

When the markets are not in equilibrium and you have
Excess of demand
Excess of supply

Answer 5

Excess of demand: suppliers raise the price

Excess supplies: lowers the price

Question 6

Normal good

Answer 6

Demand increases when income increases

Decreases when income decreases

Elasticity higher than zero

Question 7

Inferior good

Answer 7

Demand decreases when income increases

Increases when income decreases

Elasticity is lower than zero

Question 8

Substitutes

Answer 8

Demand of once increases when the price of another increases

Elasticity higher than zero

Question 9

Complements

Answer 9

When the demand of one decreases when the price of another increases

Elasticity lower than zero

Question 10

Types of market

Answer 10

Perfect competition
Monopoly
Monopolistic competition
Oligopoly