Perfect competition, imperfectly competitive markets and monopoly

Tick each line you got. Your score builds from the marks on the scheme.

• identifies that the monopolist faces the whole downward-sloping market demand curve, unlike the perfectly competitive firm, which faces a perfectly elastic demand curve at the market price1 mark
• identifies that for a downward-sloping demand curve, marginal revenue lies below average revenue (price), unlike under perfect competition where MR = AR = price1 mark
• correctly applies the MR = MC rule to find the monopolist's profit-maximising output1 mark
• correctly identifies that the monopolist then reads a higher price off the demand curve at that (lower) output than marginal cost1 mark
• identifies that in perfect competition, firms produce where price equals marginal cost, giving a lower price and higher output than the monopoly outcome1 mark
• explains that high barriers to entry let the monopolist sustain this higher price and lower output, and supernormal profit, into the long run, unlike a perfectly competitive firm1 mark

Nothing ticked yet - 6 available

Tick each line you got. Your score builds from the marks on the scheme.

• basic, undeveloped assertion, e.g. monopoly is bad for consumers, with little development or diagrammatic reasoning.3 marks
• one or more developed chains, e.g. allocative inefficiency and higher prices under monopoly, or a counter-argument such as economies of scale or dynamic efficiency, but one-sided or with limited evaluation.3 marks
• balanced chains developed on both sides, referencing efficiency concepts and diagrams, with a supported judgement addressing 'always'.2 marks
• Specific content: chain (against monopoly) - a profit-maximising monopolist sets output where MR = MC then charges a price above marginal cost, restricting output and raising price above the perfectly competitive level, causing allocative inefficiency and a loss of consumer surplus, part of which becomes producer profit and part a deadweight welfare loss.2 marks
• Specific content: chain (against monopoly) - with no competitive pressure, a monopolist may fail to minimise costs, organisational or X-inefficiency, since there is less incentive to cut costs when supernormal profit is protected by barriers to entry.2 marks
• Specific content: chain (for monopoly, counter) - a monopolist's supernormal profit can fund research and development that smaller, perfectly competitive firms could not afford, potentially leading to dynamic efficiency, new products or cost-reducing innovation over time.2 marks
• Specific content: chain (for monopoly, counter) - in industries with very high fixed costs, a single large firm may achieve substantial economies of scale that many small perfectly competitive firms could not, giving a lower average cost, the natural monopoly argument.2 marks
• Specific content: evaluation - the answer depends on the industry's cost structure, on whether the monopolist actually reinvests supernormal profit into innovation or simply extracts it as profit, and on the strength of any regulation constraining the monopolist's behaviour.2 marks
• Specific content: judgement - a supported conclusion that monopoly is not always less efficient or worse for consumers; the standard static analysis favours perfect competition on allocative efficiency and price, but the case is less clear-cut once dynamic efficiency, economies of scale and regulation are considered.2 marks

Nothing ticked yet - 20 available