Tài liệu Perfect competition and monopoly:The limiting cases of market structure

Perfect competition
Characteristics of a perfectly competition market
many buyers and sellers
–so no individual believes that their own action can affect market price
firms take price as given
–so face a horizontal demand curve
the product is homogeneous
perfect customer information
free entry and exit of firms



Monopoly
A monopolist:
–is the sole supplier of an industry’s product
and the only potential supplier
–is protected by some form of barrier to entry
–faces the market demand curve directly
–Unlike under perfect competition, MR is always below AR.