1.Concept of Market It may be defined as an arrangement of establishing effectivey relationship between buyers and sellers of the commodity. Different components of market are: 2.Forms of Market There are two main forms of market: 3.Perfect Competition It is a form of market in which there are very large number of buyers and sellers of a homogeneous product. Price is determined by the market forces of the supply and demand. An individual firm is a price
taker. Different features of perfect competition are: 4.Imperfect Competition It is a form of market structure showing some but not all features of
competitive market. It includes three different types of market: (i) Monopoly It is a form of market in which there is a single seller of a commodity and having a complete control over its price. Features of Monopoly Reasons
for Emergence of Monopoly Market (ii) Monopolistic Competition It is a form of the market in which there are large number of sellers, selling differentiated product. Each firm has a partial control over price. Features of Monopolistic Competition (iii) Oligopoly It is a form of market in which there are few large firms which sells both homogeneous as well as differentiated products. Two important forms of oligopoly are collusive oligopoly and non-collusive oligopoly. Oligopoly is further classified into: Features of Oligopoly 1.What is imperfect oligopoly? (All India 2014) 2.What is perfect oligopoly? (Delhi 2014) 3.State the main features of a perfectly competitive market. (Compartment 2014) 4.What is meant by collusive oligopoly? (Compartment 2014) 5.State whether the following statement is true or false. ‘A monopolist can sell
any quantity at the price, he likes’. Give reason. (hots; Delhi 2013) 6.Which is a price taker firm? (Delhi 2012; All India 2012) 7.When is a firm called price taker? (Delhi 2011) 8.When is a firm called price maker? (All India 2011) 9.Which market form has the least number of producers? (All India 2011) 10.Define oligopoly. (Delhi 2011c, 2010) 11.Name the characteristic which makes
monopolistic competition different from perfect competition. (Delhi 2010) 12.State one feature of oligopoly. (Delhi 2010) 13.In which market form a firm
cannot influence the price of the product? (All India 2010) 14.Define monopoly. (All India 2010; Delhi 2009) 15.What can you say about the number of buyers and sellers under monopolistic Competition? (All India 2010) 16.Give meaning of monopolistic competition. (All India 2010) 17.What is the effect on price when a perfectly competitive firm tries to sell more? (Delhi 2009C) 18.What is the effect on price when a monopoly firm tries to sell more? (Delhi
2009c) 3 Marks Questions19.Why is the number of firms small in oligopoly? Explain. (All India 2014) 20.Why are the firms said to be interdependent in an oligopoly market? Explain. (Delhi 2014) 21.Under what market condition does Average Revenue always equal Marginal Revenue? Explain.
(Delhi 2014) 22.Explain the implications of large number of buyers and sellers in a perfectly competitive
market. (Foreign 2014; Delhi 2012; All India 2011) 23.Explain ‘freedom of entry and exit to firms in industry’ feature of monopolistic competition.
(Delhi 2013) 24.Why can a firm not earn abnormal profits under perfect competition in
the long-run? Explain. (hots All India 2013) 25.Why is the demand curve of a firm under monopolistic competition more elastic than under monopoly? Explain. (hots; All India 2013) 26.Explain the implications of perfect knowledge about market under perfect competition. (Delhi
2011) 27.Explain the
implications of the feature homogeneous products in perfectly competitive market. (All India 2011; Delhi 2010) 28.Why is a firm under perfect competition a price taker and under monopolist competition a price maker? Explain briefly. (Delhi 2011c, 2009) 29.Giving reasons, distinguish between the behaviour of demand curves of firms under perfect competition and monopolistic competition. (All India 2010) Demand curve is perfectly elastic. It means that a firho can sell any amount Of the commodity at the prevailing price. Even a fractional rise in price would wipe out entire demand for the firm’s product. Firm’s demand curve is indicated by a horizontal straight line parallel to X-axis. Demand curve is more elastic. Under monopolistic competition, the firm faces a negatively slope demand curve. It means that a large quantity of the commodity can be sold by decreasing its price. But demand curve here is more elastic than the demand curve faced by monopoly firm. It is because of availability of close substitutes in the market. 30.Explain the features of perfect competition. (All India 2009) 31.State three features of monopoly. (Delhi 2008) 32.State three features of monopolistic competition. (Delhi 2008; All India 2006) 33.Explain differentiated products characteristic of monopolistic competition.(Delhi 2006C) 4 Marks Questions34.Explain two points of distinction between monopoly and monopolistic competition. (All India 2009)
6 Marks Questions35.Distinguish between collusive and non-collusive oligopoly. Explain how the oligopoly firms are interdependent in taking price and output decisions? (Delhi 2011) Ans.(1) Difference between collusive and non-collusive oligopoly
(ii)Firms are interdependent in an oligopoly market Under oligopoly, there is a high degree of interdependence between the firms. Price and output policy of one firm has a significant impact on the price and output policy of the rival firms in the market as there are only few firms, which are large in size. When one firm lowers its price, the rival firms may also lower the price. And, when one firm raises the price, the rival firms may take its decision accordingly. Note While taking an action on price or output, a firm must take into account the possible reaction of the rival firms in the market. 36.Distinguish between collusive and non-collusive oligopoly. Explain the following features of oligopoly. (i)Few firms (ii) Non-price competition (All India 2011) Ans. Difference between collusive and non-collusive oligopoly
Features of oligopoly are: (2) (i) Few firms In oligopoly form of market, there are few firms dominating the market for a commodity and each seller has a significant share in the market; 37.Explain
the implications of the following features of a perfectly competitive market. (ii) Perfect knowledge about the inputs used in the production Due to homogeneous product or identical in every respect like quality, size, etc. The products are perfect substitutes of one another. As a result, both buyers and sellers have perfect knowledge about the inputs used in the production. 38.Explain the implications of the following features of oligopoly market. (i) Few firms (ii) Barriers to the entry of firms. (All India 2010) Ans. (1) Few firms Oligopoly is a form of market in which there are few firms. However, each firm is so big that it controls a significant segment of the market. It is so significant that the price and output policy of one firm has a direct bearing on the price and output of the rival firms in the market. That is why, it is not possible to draw any unique demand curve for an oligopoly firm. Often the oligopoly firms tend to form trusts and cartels with a view to avoid price competition and earn monopoly profits. Only a small number of firm can form trusts and cartels to earn monopoly profits. (ii) Barriers to the entry of firms There are various barriers or restrictions to the entry of new firms. These barriers are almost similar to those under monopoly. Entry of the new firms is extremely difficult, if, not impossible. These barriers can be natural like requirements of huge capital or operating at minimum average cost of artificial barriers like patent rights which prevents entry of new firms in the industry. 39.Explain the implications of the following features of perfectly competitive market. (i) Large number of buyers (ii)Large number of sellers (Delhi 2010c) Ans, (i) Large number of buyers In perfectly competitive market, large number of buyers are present, due to which each buyer buying only a small fraction of the total market transactions. Buyers take the price of the commodities as a given parameter, acts accordingly and will adjust their demand according to the set price of the market. (ii) Large number of sellers In perfectly competitive market, large number of sellers exist in the market due to which they cannot influence the sale of the market. They will take the market price as a given parameter acts accordingly. At the set price of the market they will sell their products and gains the title ‘price taker’. 40.Explain the implications of the following features of monopolistic competition (i) Differentiated products (ii) Freedom of entry and exit to firms (All India 2009) Ans. (i) Product differentiation It is a distinct feature of monopolistic competition. A product is often differentiated by way of trade marks and brand names size, quality, quantity etc. The differentiated products are close substitutes of each other, like Colgate and Close up toothpaste. Because of product differentiation, each firm can decide its price policy independently. So, that each firm has a partial control over price of its product. This is done to attract buyers from the rival firms in the market. Also because of this firms produce an excess capacity (quantity), as their product is different and hence they have some consumers who always consumes their products only. (ii) Freedom of entry and exit to firms Firm under this form of market are free to leave the industry if they are suffring from loss, on the other hand profits could attracts new firms. 41.Explain the implications of the following features of perfect competition. (i) Homogeneous products (ii) Freedom of entry and exit to firms (Delhi 2009C) Ans. (i) Homogeneous products It means the products which are identical in quality, shape, size and colour. So, no producer is in a position to charge a different price of the product it produces. A uniform price prevails in the market. In a perfectly competitive market, commodity must be homogeneous (identical). Thus, the buyers find no reason to prefer the product of one seller to the product of another. (ii) Freedom of entry and exit to firms A firm can enter or leave the industry any time. Because of free entry and exit, firms in the long-run can earn only normal profits (TR =TC or AR = MR and P = MC). In case extra normal profits are earned, new firms will join the industry, market supply will increase. Market price will fall, extra normal profits will be wiped out. In case of extra normal losses, some of the existing firms will leave the industry. Market supply will decrease, market price will increase. Extra normal losses will be wiped out. 42.Explain the implications of the following (i) Differentiated products under monopolistic competition. (ii) Large number of sellers under perfect competition. (All India 2008) Ans. (i) Product differentiation It is a distinct feature of monopolistic competition. A product is often differentiated by way of trade marks and brand names size, quality, quantity etc. The differentiated products are close substitutes of each other, like Colgate and Close up toothpaste. Because of product differentiation, each firm can decide its price policy independently. So, that each firm has a partial control over price of its product. This is done to attract buyers from the rival firms in the market. Also because of this firms produce an excess capacity (quantity), as their product is different and hence they have some consumers who always consumes their products only. (ii) Large number of sellers There are very large number of buyers and seller are present in the market as a result of which size of each economic agent is so small as compared to the market that they cannot influence the price through their individual actions. 43. Distinguish between perfect competition and monopolistic competition. Ans. Difference between perfect competition and monopolistic competition
Chapterwise Important QuestionsImportant Questions EconomicsNCERT Solutions Is a form of market in which there is a large number of buyer and seller of a homogeneous product perfect competition oligopoly?The correct answer is Perfect competition. In a perfect competition market structure, there are a large number of buyers and sellers. All the sellers of the market are small sellers in competition with each other.
Which type of market it is which has a large number of buyer and seller selling homogeneous goods that is single price?Perfect competition is a type of market where there are large number of buyers and sellers who deals in homogeneous product due to which no individual unit is able to influence the price of the product and the firms have to quote the price that prevails in the market because of the customer's knowledge about the price.
In which market there is a large number of buyers and sellers?Perfect competition is a market situation where there are a large number of buyers and sellers and selling of identical products takes place. The commodity is sold at a uniform price in the market.
In which form of market products are homogeneous?Under perfect competition, products are homogeneous. Perfect competition is a form of the market in which there is a large number of buyers and sellers and where homogeneous product is sold at a uniform price.
|