Name the market structure (Perfect Competition, Imperfect Competition or Monopoly) to which each statement below is most likely to apply:
(i) The firm has a perfectly elastic demand curve - Leaving Cert Economics - Question 3 - 2011
Question 3
Name the market structure (Perfect Competition, Imperfect Competition or Monopoly) to which each statement below is most likely to apply:
(i) The firm has a perfect... show full transcript
Worked Solution & Example Answer:Name the market structure (Perfect Competition, Imperfect Competition or Monopoly) to which each statement below is most likely to apply:
(i) The firm has a perfectly elastic demand curve - Leaving Cert Economics - Question 3 - 2011
Step 1
(i) The firm has a perfectly elastic demand curve.
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Answer
This statement refers to Perfect Competition. In a perfectly competitive market, firms are price takers, and they face a perfectly elastic demand curve.
Step 2
(ii) The product of the firm is unique.
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Answer
This statement pertains to Monopoly. A unique product, with no close substitutes, is characteristic of a monopolistic market structure.
Step 3
(iii) Restaurants could be an example of this market structure.
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This statement indicates Imperfect Competition. The restaurant industry is often characterized by many firms selling differentiated products, indicating imperfect competition.
Step 4
(iv) Average costs of the firm are at a minimum.
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Answer
This statement aligns with Perfect Competition. In the long run, firms in perfect competition operate where average costs are minimized, achieving productive efficiency.
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