What is the difference between the demand curve for a resource under pure competition and under imperfect competition?
What will be an ideal response?
The demand for a resource depends on the marginal productivity of the resource and the price of the product the resource produces. In purely competitive markets, the price of the product remains constant and only the marginal product of an additional unit of a resource changes. The MRP curve or the firm’s resource demand curve declines solely because of diminishing marginal productivity. In imperfect competition, the price of the product will decline as more output is produced and marginal productivity will also decline. Thus the two factors on which resource demand depends will decline. The result is that the resource demand, or MRP curve, will tend to fall faster and be less elastic (resource employment will be less responsive) to a change in resource price for the imperfectly competitive firm compared with the purely competitive producer.
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In the above figure, if the market was a single-price monopoly rather than perfectly competitive, which area shows the transfer of consumer surplus from consumers to producers?
A) A + B B) C + D C) C + D + E D) E + H
In the figure above, if the market is unregulated,
A) more than the efficient amount of output will be produced. B) less than the efficient amount of output will be produced. C) the allocation of resources will be efficient because the efficient amount of output will be produced. D) the deadweight loss will be zero.