Microeconomics

Table of Contents

1. Topic pack - Microeconomics - introduction
2. 1.1 Competitive Markets: Demand and Supply
3. 1.1 Competitive Markets: Demand and Supply - notes
4. 1.1 Competitive markets - questions
5. 1.1 Competitive markets - simulations and activities
6. 1.2 Elasticities
7. 1.2 Elasticities - notes
8. Section 1.2 Elasticities - questions
9. Section 1.2 Elasticities - simulations and activities
10. 1.3 Government intervention
11. 1.3 Government Intervention - notes
12. 1.3 Government intervention - questions
13. 1.3 Government intervention - simulations and activities
14. 1.4 Market failure
15. 1.4 Market failure - notes
16. Section 1.4 Market failure - questions
17. Section 1.4 Market failure - simulations and activities
18. 1.5 Theory of the firm
19. 1.5 Theory of the firm - notes (HL only)
    1. Cost theory
    2. Calculating costs
    3. Short-run
    4. Long-run
    5. Internal economies of scale
    6. External economies of scale
    7. Diseconomies of scale
    8. Long run cost curves
    9. The very long run
    10. Revenues
    11. Revenues - notes
    12. Profit
    13. Profit - notes
    14. Combining revenue and cost curves
    15. Profit maximisation - price taker
    16. Profit maximisation - price setter
    17. Alternative aims of firms
    18. Profit, sales and revenue maximisation
    19. Perfect competition
    20. Perfect competition - notes
    21. Short-run to long-run - profits
    22. Short-run to long-run - losses
    23. Shut down price, break-even price
    24. Efficient allocation of resources
    25. Monopoly and oligopoly
    26. Monopoly and oligopoly - introduction
    27. Growth and power
    28. The model of monopoly
    29. Monopoly - profit maximisation
    30. Monopoly equilibrium
    31. Monopoly v. perfect competition
    32. Economic efficiency in perfect competition
    33. Economic efficiency in perfect competition and monopoly
    34. Efficiency and market structure
    35. Monopolistic competition
    36. Monopolistic competition - notes
    37. Monopolistic competition in the short-run
    38. Monopolistic competition in the long run
    39. Oligopoly
    40. Oligopoly - notes
    41. Advertising and branding
    42. Product innovation
    43. Theories of oligopoly - non-collusive
    44. The kinked demand curve theory
    45. Kinked demand curve - change in cost
    46. Cut-price competition (predatory pricing)
    47. Theories of oligopoly - collusive
    48. Forms of collusion
    49. Price discrimination
    50. Equilibrium of the discriminating monopolist
20. Section 1.5 Theory of the firm - questions
21. Section 1.5 Theory of the firm - simulations and activities
22. Print View

Monopoly v. perfect competition

If you would prefer to view this interaction in a new web window, then please follow the link below:

• Monopoly vs perfect competition

Consumer and producer sovereignty

Because of the conditions of perfect competition - many buyers and sellers, perfect knowledge and freedom of entry - firms would be forced to produce those goods and services which consumers most wanted. Any firm or even group of firms not behaving in this way would be unable to survive for very long as the competitive pressures from those firms who were responding to consumers' wishes would soon drive them into extinction. From this point of view it could be argued that consumers are sovereign in as much that it is they who 'call all the shots'. However, as described previously, monopoly producers may well decide on which types of goods they are going to supply and at what prices, and then set about manipulating and moulding consumers' tastes, via their marketing activities, to match their pre-determined output plans - a situation in which the producer and not the consumer is sovereign.

1

Output levels - Monopoly At which output level in the diagram below will the monopolist produce to ensure productive efficiency? a) Output level 1 b) Output level 2 c) Output level 3 d) Output level 4 e) Output level 5 Please select an answerNo, that's not right. Profits are maximised where MC=MR.Yes, that's correct. This is the point where the firm will be productively efficient (minimum of average cost).No, that's not right. This is the point where the firm will be allocatively efficient (MC=price).No, that's not right. This is where total revenue will be maximised (MR=zero).No, that's not right. This is where the firm will make normal profits (AC=AR).

2

Output levels - Monopoly At which output level in the diagram below will the firm produce to ensure allocative efficiency? a) Output level 1 b) Output level 2 c) Output level 3 d) Output level 4 e) Output level 5 Please select an answerNo, that's not right. Profits are maximised where MC=MR.No, that's not right. This is the point where the firm will be productively efficient (minimum of average cost).Yes, that's correct. This is the point where the firm will be allocatively efficient (MC=price).No, that's not right. This is where total revenue will be maximised (MR=zero).No, that's not right. This is where the firm will make normal profits (AC=AR).

3

Monopolist - productive and allocative efficiency A monopolist will be productively and allocatively efficient in long run equilibrium. a) True b) False Yes, that's correct. The statement is false. A monopolist can be either productively OR allocatively efficient, but not both. If they choose to maximise profits, they will be neither.No, that's not right. The statement is false. A monopolist can be either productively OR allocatively efficient, but not both. If they choose to maximise profits, they will be neither.Your answer has been saved.

4

Perfect competition - productive and allocative efficiency A firm in perfect competition will be both productively and allocatively efficient in long-run equilibrium. a) True b) False Yes, that's correct. The statement is true. In long-run equilibrium in perfect competition MC=MR=AC=AR and this will ensure both productive and allocative efficiency.No, that's not right. The statement is true. In long-run equilibrium in perfect competition MC=MR=AC=AR and this will ensure both productive and allocative efficiency.Your answer has been saved.