Ethan Weston
Foundations of Economic
Dr. Nasrin Shahinpoor
11 March 2021
Short Answer Questions
1) The consequence for the owner a firm for rising prices under perfect competition would be the
loss of consumers. Since there would be other firms who would produce the same product at a
lower cost, the demand for your products would be lower. Rising prices under a monopoly
would not lose customers since the one product (such as utility power and electricity) is
produced by a single company. Consumers would not have anywhere else to go to get that
product, so the rise in price would not affect the demand very much. The consequence for rising
prices under oligopolies depends on the market since it can, at times, act like a monopoly or
under perfect competition. As a result, the consequence for rising prices can be minimal or can
be huge. The consequence for rising prices under a monopolist competitor can be unnoticeable
if the competitor of your similar monopoly does not out cut you in price. For example, each
company could have a monopoly on toothpaste, but still have different distinct brands of that
toothpaste. If one toothpaste (lets us say Crest) is cheaper than another toothpaste (let us say
Arm & Hammer), then Arm & Hammer would lose revenue and their demand would be much
lower than Crest.
2) Monopolistic competition is controlled by a single firm where there is no competition. Also,
there are no consequences of entering the market since there is no competition and products
can have alternatives with a set price. Perfect Competition is the opposite. Under a perfectly
competition market, there are many firms competing with a high consequence of entering. Also,
the products that are sold are the same or nearly the same with competitive prices.