1.Define perfect competition.

Perfect competition describes markets such that no participants are large enough to have the market power to set the price of a homogenous product. Because the condition for perfect competition are the strict there are few if any perfectly competitive markets.A perfectly competitive market has been defined as one where an individual firm is unable to influence the price at which product is sold in the market.

2. What is meant by prices being rigid?

The proposition that some prices adjust solely in response to market shortage or surpluses.This condition is most important for macroeconomic activity in the short run and short run aggregate market analysis . In particular rigid prices are a key reason underlying the positive slope of the short run aggregate supply curve prices tend to be most rigid in resource market,especially labour markets, and the least rigid in financial markets with  product markets falling somewhere in between.

3. Define the term monopoly.

A monopoly is when a business usually a large corporation is the only provider of a good or services.Monopolies are usually bad for an economy because they restrict free trade which allows the market itself to set prices.

4.What is the relationship between average revenue and total revenue?

Total revenue(TR) is the total amount of money that a firm receives from the sale of its goods.If the firm practices single pricing rather than price discrimination TR=PXQ.  Average revenue (AR) is the total amount of money that a firm receives from the sale divided by the number of units of goods sold.

AR=TR/Q

The average revenue at only level of output is given by the slope of the line joining the origin and the point on the total revenue curve corresponding to the output level under consideration.

5.Define Monopolistic competition.

Monopolistic competition in a commodity market arises due to the  commodity being homogenous.In monopolistic competition the short run equilibrium results in quantity produced being lesser and prices being higher compared to perfect competition .This situation persist in the long run, but long run profits are zero.

6.Define oligopoly.

Oligopoly in a commodity market occurs when there are a small number of firms producing a homogenous commodity.If the market of a particular commodity consists of more than one seller but the number of sellers is few, the market structure is termed oligopoly.

7. How far is a perfectly competitive equilibrium of the firm determinate. explain?

A perfectly competitive equilibrium of the firm is fully determinable. If two conditions are fulfilled .Firstly its marginal cost must be equal to its marginal  revenue.secondly its marginal cost curve must cut the marginal revenue curve from below .

8. Distinguish between equilibrium price and market price.

Equilibrium price refers to that price at which the demand and supply of the commodity are in equilibrium with each other,Market price,on the contrary is the rise which actually rates in the market at a particular time .It is short term price. The demand and supply may not always be equal to each other in the short period.

9.Compared with perfect competition the monopoly price is always higher.why?

The monopoly price is always higher than the competitive price.The reason is that the price under perfect competition is equal to the marginal cost of product.But the monopoly price is fixed by the monopolist at a level which is much higher than its marginal cost of production .Hence the monopoly price is always higher than the competitive price.

10.Why are selling cost peculiar only to monopolistic competition or incompatible with perfect competition?

 The selling costs are peculiar only to monopolistic competition because under this type of competition the firms produce differentiate products.As such advertisements become inevitable.But the selling cost are incompatible with perfect competition  because under this type of competition each firm produces a homogenous product.As such there is no necessity of advertisement.