1. Problem #1, page 15 in textbook.
Imperfect competition structure market is the market where there are very few companies, so that they have the power control the market. Because tehre are very few competitors, they can charge their products or services more than the market value. It means that they can decide the price for their products and services. Some examples are electric market, water supply market, and fuel market in Vietnam. Because there is only one electric company and very few company in water supply market and fuel market, so that they can decide their price and charge a high price for their service. The reason is the government regulations in Vietnam, the government controls those market.
2. Problem #2, page 15 in textbook.
The perfectly competitive market does not reflect a setting of strategic interaction because in this market structure each firm can not decide the price for their product or service. As the result, they do not need to make plan or strategy for their firms.
3. Explain the profit-maximizing production decision of a perfectly competitive firm. Be sure to describe the assumptions/market structure of perfect competition and the condition that guarantees maximum profit.
Infinity buyers and sellers.
Free entry and exit.
All the firms produce a standardize product.
All the buyers and sellers can have all the information about the market. The perfectly competitive firms area price takers and they can not influence the market price. To maximize the profit, the perfectly competitive firms have to choose an output level that market price equal the marginal revenue (MR=P). To maximize the profit the marginal cost must equal the marginal revenue (MR=MC), but in perfect competition the marginal revenue equal the market price. P=MC
4. Explain the profit-maximizing production decision of a monopoly firm. Be sure to describe the assumptions/market structure of monopoly and the...
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