Answer to Question #98319 in Microeconomics for Shafiqah

Question #98319
1-i.Compare a perfectly competitive market and monopoly by sketching a suitable graph

ii.Will an increase in the demand for a monopolist’s product always result in a higher price?
Explain by using a suitable graph
Expert's answer

In a perfectly competitive market the firms are price takers while in monopoly the firms are always price makers this is shown in the sketch below

The demand for a monopolistic product will result to higher price because when demand is inelastic the graph below shows it

With the graph above market shifts the demand when it's faced by a monopolistic competitive firm. This varies with the amount of tax imposed which causes changes to occur between D0 to D1 while the curve shifts from D1 to D0 for the consumers when they are paid subsidy in the monopolists product.

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