(a) Critically compare and contrast the characteristics of four market structures (ie. monopoly, oligopoly, perfect competition or monopolistic competition) regarding the allocation of resources. Provide a real life example of each market structure.
In answering this question you need to
- Discuss the key features of each market structure such as number of sellers, type of product, entry conditions.
- Using diagrams, explain short run and long run
profits and losses in four market structures.
- Compare the allocation of resources in monopoly, oligopoly and monopolistic competition market structures with perfectly competitive market structure.
(b) Explain what negative externalities are, and why there may be a case for government intervention to address them. Choose one example from your country to analyse diagrams whether monopoly is socially preferred market structure to the perfectly competitive market in the presence of negative externality.
In answering this question you need to
- Provide a brief description of negative externalities. Use diagrams to illustrate your discussion.
- Provide data for the case study from your home country.
- Using economic theory and real data from your case study analyse government solution to the problem of externality.
- Explain the effect of externality on monopoly and perfectly competitive market outcomes (i.e. price and quantity) including dead-weight loss. Illustrate your analysis on the diagram(s).