Imperfect Competition

They lack market power

Consumer preferences are solely based on price

Product differentiation is possible

Price is the only differentiating factor

Perfectly elastic

Downward-sloping

Perfectly inelastic

Horizontal

Firms will experience an increase in economies of scale.

The product quality will necessarily improve.

There will be an increase in long-run economic profits for firms.

There will be a shortage of the product.

Monopoly

Monopolistic competition

Perfect competition

Oligopoly

Price-setting power held by individual firms.

Many small buyers and sellers.

Homogeneous products.

Significant barriers preventing entry into or exit out of the market.

Firms may earn positive or negative economic profits

Firms produce at minimum average total cost

Price equals marginal cost

Economic profits are zero

The potential increase in dinner service demand after renovations are complete.

Savings on utility bills by closing during lunch hours.

The cost of renovation materials and labor.

The income lost from not serving customers during lunch hours.

By assessing potential returns from different investment options using those funds.

By calculating only the direct costs associated with quality improvements.

By estimating customer satisfaction levels before and after improving product quality.

By determining how much product price can be increased due to improved quality alone.

Profits are driven to zero in both markets due to free entry and exit, but under different conditions.

Profits become negative under monopolistic competition as firms cannot compete with price takers efficiently.

Profits remain positive under monopolistic competition due to product differentiation.

Profits are higher under perfect competition because there is no need for advertising expenses.

Consumer surplus remains unchanged as the number of firms in the market is large.

Consumer surplus may increase due to greater variety and perceived benefit from differentiation.

Consumer surplus increases only if all firms collude to set prices above competitive levels.

Consumer surplus always decreases because companies have more power over pricing.