a) What are the main characteristics associated with perfect competition and monopoly? What do these characteristics suggest about the degree of market power possessed by an individual firm in each of these markets?

b) Why may perfect competition be irrelevant when studying real-world health care markets? Cite some examples.

c) As compared to a perfectly competitive industry, monopoly can cause industry output to be (higher, lower, cannot determine) and the market price to be (higher, lower, cannot determine).

Give an intuitive explanation for the answers you chose above and explain how your answer is consistent with the analytical results shown on slide

Figure 8.5 - The Monopoly Outcome Price per unit (P) The perfectly competitive A S = MPC outcome is represented by M point C. Consumer surplus is PM C larger (the area APCC Pc compared to the area APMM FV in case of monopoly). G MR D = MPB OM ac Quantity of generic aspirin (Q) A monopoly produces at QM where MR = MC and charges price PM. Reflecting that society's scarce resources are misallocated, a deadweight loss of area MCF is created by the monopolist