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Question
Which two forms of market earn normal profit in the long run?
Options
Perfect competition and monopoly
Perfect competition and monopsony
Monopoly and monopolistic competition
Perfect competition and monopolistic competition
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Solution
Perfect competition and monopolistic competition
Explanation:
Perfect competition allows for free entry and exit, limiting firms to normal earnings over time. Monopolistic competition has low entry barriers, making it easy for new enterprises to enter the market. As a result, market supply increases. Increased availability leads to price reductions by enterprises. Therefore, corporations can only earn typical profits in the long run.
RELATED QUESTIONS
Discuss any two features of a monopolistically competitive market.
What is the shape of the demand curve faced by any monopoly firm? Support your answer with a diagram.
'Homogeneous products' is a characteristic of ______.
Match the following:
| Column I | Column II | ||
| A. | Demand curve under perfect competition | (i) | Indeterminate demand curve |
| B. | Demand curve under monopoly | (ii) | Downward sloping but less elastic |
| C. | Demand curve under monopolistic competition | (iii) | Horizontal straight line |
| D. | Demand curve under oligopoly | (iv) | Elastic demand curve |
Read the following statements carefully and choose the correct alternative:
Assertion (A): Price discrimination is possible under monopoly.
Reason (R): A monopolist can charge different prices in different markets because different sets of consumers - rich and poor - have different price elasticity of demand for the monopolist's product.
State two important characteristics of monopoly.
Highlight the importance of selling costs in a monopolistically compatible market.
Identify the market form for the following:
Textile industry in India.
With the help of an example explain the meaning of price discrimination.
Why an individual firm under perfect competition cannot influence the market price?
