Demand Curve On Monopolistic And Perfect Competition

Imperfect Competition
Name:
Institution:
Date of submission
Imperfect Competition
Question 1: Demand curve on monopolistic and perfect competition
There is normally a downward slope noted on the demand curve for a monopolistic competition. Therefore, the prices of the commodity under such for every additional unit of the output fall continuously with the increase in output. Such downward shape of the curve implies that the monopolist is in a constant search of price instead of taking the prices. In addition, the monopolist strives to maximize the profit where the cost of producing the additional units and marginal costs equals the additional revenue received from the various goods sold (Riley, 2015). Thus, a trend of increased marginal cost above the marginal revenue makes the business run into losing money at any additional product that is produced. Consequently, there is a restriction on the output and higher costs in the products that the monopolists produce. On the other hand, the in perfect competition, the marginal revenue usually remains constant for every unit that is sold (Anderson & Coate, 2005). The enterprises under such competition are viewed as price takers which are normally determined by the intersection of the market supply curve and the demand curve. The demand curve in the perfect competition slopes downwards due to the increase in prices of commodities with a decrease in the quantity of the product demanded. The prices are normally determined by the intersection point between market supplies. Hence, the enterprises do not determine the prices or rather take the price that has been determined by the behavior of demand and supply curves (Kaufman, 2007).
Secondly, the competitive enterprises have perfect elastic curves because they are able to sell their products with several alternatives while the monopolies have the downward slope curve since they are only the producers of the products. At such moments, the monopolist has to ensure that it does not abuse the market powers hence it produces products at any point within the curve (Kaufman, 2007).
Question 2: products produced in a monopolistic market
Oil is the product that is most likely to be sold under monopolistic market. This is because the product has no cost effective alternatives especially in the motor vehicle industry and the machinery that use petrol and diesel. Secondly, the producer of crude oil in the world market is few hence they dictate the oil prices hence there is no perfect competition in the market. The demand is inelastic based on the prices since it has few substitutes. On the same note, the inelasticity of the demand comes as a result of income in the advanced OECD economies (Economics Online, 2017).
Question 3: Zero Profit
Zero profit normally occurs in a perfect competition market. Zero profit is normally understood as the normal profit which is revenue that is required by an enterprise to break the even hence is able to meet all the operational costs without making a loss (Ritten & Tregarthen, 2017). The zero profit normally arises from the perfectly competitive market which drives down the profits to curb various enterprises from higher revenues from the costs that are incurred during production. At s...