Free Response Questions

Topic 1: Monopoly Vs. Perfect Competition

Refer to the content in Weeks 8-14, as well as your notes and examples.

Parts 1 and 2

Create an example of a market for a specific product that does the following:

  • Compare outcomes in terms of price and quantity for the market in case there is one firm (monopoly) or there are many firms, each with the same linear total cost (TC) function as the monopolist, that are subject to a linear demand curve
  • Include the deadweight loss, profit for the monopolist, and profit in the long run for competitive firms
  • The numbers are simple enough and the answer should not unnecessarily complicated. Make sure you address the following in Parts 1 and 2:
    • MC, MR, and the demand curve correctly identified
    • A correct graph of MC, MR, and demand with the following:
      • Appropriate labeling
      • Profit area for the monopolist
      • Competitive outcome
      • Deadweight loss

Part 3

Find a real market with similar characteristics and discuss the outcomes with monopoly and competition. Make sure you have at least 3 reliable sources (newspaper articles, scholarly papers, et cetera).