Imperfect Competition

A large number of firms producing identical products.

The presence of significant economies of scale.

Consumers having perfect information about all products in the market.

Firms being price takers.

Many firms

Price taker

Single seller

Free entry and exit

Price equals marginal cost (P = MC)

Marginal revenue equals marginal cost (MR = MC)

Price equals average total cost (P = ATC)

Marginal revenue equals average total cost (MR = ATC)

$800

$1600

$2400

$3200

To ensure the firm maximizes profits.

To prevent the firm from producing at the allocatively efficient level.

To protect consumers from high prices and restricted output.

To encourage other firms to enter the market.

The monopoly will earn positive economic profits.

The monopoly will produce the allocatively efficient quantity.

The monopoly will earn zero economic profit.

The monopoly will shut down.

The firm must be a price taker.

The firm must have monopoly power.

The firm must be able to segregate its market.

Customers cannot resell the product.

Produce a lower quantity and charge a higher price.

Produce a higher quantity and capture more consumer surplus.

Produce the same quantity and generate deadweight loss.

Produce a lower quantity and generate more consumer surplus.

$400

$800

$200

$1600

Homogeneous products

High barriers to entry

Differentiated products

Few firms