Monopoly Due on Nov 25 at 11 PM EST Score: 14 7. Comparing monopoly and perfect

Question

Monopoly Due on Nov 25 at 11 PM EST Score: 14 7. Comparing monopoly and perfect competition Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium, with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power The following graph shows the demand (D), and supply curves (S= MC) in the market for hot dogs. Perfect Competition PC Outcome 4.0 35 O Type here to search

Explanation / Answer

a)

graph (i)

perfect competition

P = MC  

It has been shown by the intersection of two curves in the graph so price and quantity under perfect competition are  

P = 1.5

Q = 250

b)

graph(ii)

for monopoly optimal output is given by

MR = MC

So P = 2.5

Q = 150

C)

Market structure Price Quantity

Perfect copetition 1.5 250

Monopoly 2.5 150  

so we can infer that, in general,a price is lower under a perfect copetition market structure and quantity is higher under a perfect copetition market structure.

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