Explain with the use of diagrams where appropriate how perfect competition leads to allocative… 1 answer below »

Explain with the use of diagrams where appropriate how perfect competition leads to allocative productive and dynamic efficiency. (10 marks)

Question 2

While firms in both the perfectly competitive structure and the monopolistically competitive structure earn zero economic profit in the long run, it can be said that perfect competition is a more efficient structure than monopolistic competition. Discuss this statement with the use of appropriate diagrams. (7 marks for explaining why firms in both market structures earn zero economic profits, 3 marks for explaining why perfect completion is more efficient.)

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Question 3

What is a natural monopoly? (3 marks) If a firm is a natural monopoly, illustrate with the use of diagrams why is it is necessary to have the price set by a regulatory authority rather than by the market. (7 marks)

Question 4:

One of the defining charateristics of an oligopoly is non-price compertion. Why is the case and how is this related to game theory scenarios such as the Prisoner’s dilemma? (10 marks)

 

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