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Answer to Question #69555 in Microeconomics for Dohon Patrick

Question #69555
what are the impacts of the following on the equilibrium condition of monopoly and perfect competition
1 change in technology
2 change in fiscal policy
3 Dynamic in exchange rate
4 change in aggregate monetary policy
5 inflation
Expert's answer
Answer:
change in technology
Monopoly: Monopoly constrains scientific and technological progress. A monopoly allows large companies to receive high profits for a while, not even introducing new advances in science and technology into the production process.
Perfect competition: Innovative function of the market of perfect competition is connected with the necessity of constant use of changes in technologies for increasing the efficiency of production and commercial activity of the company.
change in fiscal policy
Monopoly: That the introduction of the tax will lead to increased costs and the monopolist will reduce the issue and increase the price. Therefore, when introducing a product tax, it is extremely important to take into account the degree of demand elasticity. If it is high, then the price increase will be smaller than the tax, which will lead to redistribution of part of the monopoly profit in favor of consumers. Accordingly, for low-elastic demand, the imposition of a product tax will only lead to additional loss of cumulative welfare
Perfect competition: Lack of transaction costs or taxes.
inflation
Monopoly: Monopolies create inflation. Since they can set any price they want, they will raise costs to consumers. It's called cost-push inflation.
Perfect competition: On the market, for the same products, the only price prevails, therefore prices rise evenly as a result of inflation. So a new equilibrium price is set.

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