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Ans.
a. Price and revenues under Perfect Competitions.
A firm can sell any amount of the product under the given
price in perfect competition. As the price is given and fixed, the
average revenue and marginal revenue become equal to price.
The following schedule explains the relationship between
price, average revenue and marginal revenue.
Units of Price TR(Rs. MR(Rs.) AR(Rs.)
commodity )
1 10 10 10 10
2 10 20 10 10
3 10 30 10 10
4 10 40 10 10
5 10 50 10 10
Price
Reve
nue
AR
MR
O X
Out Put
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DISTINGUISH BETWEEN
Perfect Competition Monopoly
1. A type of market where there 1. Monopoly is a type of market
are large numbers of buyers in which there is only one seller
and sellers and no buyer or producing a commodity having
seller influences the market no close substitute.
individually.
2. Under perfect competition 2. Under monopoly the entry of
there is free entry and exist of new firms is strictly prohibited.
all the firms.
3. No Individual seller can 3. Under monopoly, the seller
influence the price under can determine the price and he
perfect competition. He is a is a price maker & not a price
price taker. taker.
4. A firm and in industry are 4. There is a single firm which
different under perfect acts as the industry.
competition.
5. It is hardly exists in the 5. Monopoly exists in the
market. market.
6. There is uniform price under 6. There may or may not be
perfect competition. practice uniform price by the
monopoly.
7. All the consumers pay the 7. All the consumers pay the
same price. different price.
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4. Free entry and exist:- Perfect competition allows free entry and exist for
the sellers of the commodity under consideration. The sellers are free to
enter the market at any time as per their wish and they also can quit the
market whenever they want. There are no legal restrictions on the closing
down of the firm.
Features of Oligopoly.
Oligopoly :- Oligopoly is an important form of imperfect
competition. In the word Oligopoly ‘Oligo’ means few and ‘poly’ means seller.
Oligopoly therefore refers to the market structure representing few sellers or
firms.
1. Few Firms:- Oligopoly is the market in which few firms compete with
each other. The simplest model of oligopoly is duopoly. Duopoly is the
market structure when only two firms produce and supply the product.
For e.g. Coke and Pepsi.
2. Nature of the product: In an oligopoly market, all the few firms produce
an identical product. Such an oligopoly market is called Pure Oligopoly.
On the other hand, firms with product differentiation constitute
imperfect oligopoly.
3. Interdependence of Firms: In an oligopoly market, there is
Interdependence among firms. Thus the move made by one firm to
reduce price attracts reaction from other firms.
4. Complex market structure:- The oligopolistic market structure is quite
complex. Cartel is an example of collusive oligopoly. The non-collusive
oligopoly is the other form of complex market structure.
5. Selling cost:- Advertisement is an important method used by oligopolists
to gain larger share in the market. The costs incurred on advertisement
are selling costs.
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