Topic:Perfectly Competitive andMonopoly Market Structures

A perfectly competitive market structure has key features. There are many buyers and sellers so neither side of the market has market power. The product provided to the market is identical across suppliers. There are no barriers to entry.

A monopoly is a firm that is the only seller of a good or service that does not have a close substitute. Monopolies have very strong barriers to entry.

1. Give examples for perfectly competitive and monopoly market structures. Describe how a firm that would meet the conditions of a perfectly competitive and monopoly market structures.
2. Compare the efficiency and profit maximization conditions for perfectly competitive and monopoly market structures. How do these differences contribute to deadweight loss in a monopoly market?
3. Can you think of reasons why a monopoly might decide on their own to increase production and lower prices to earn an acceptable profit rather than maximize profits?