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Supply remaining the same, a rightward shift in the demand curve means higher price and higher quantity sold.

Perfect Competition: It is a situation in which a large number of sellers and buyers selling a homogeneous product at a uniform price.

Main features of Perfect Competition:

(i) A large number of Buyers and Sellers: There are so many buyers and sellers that no individual buyers or sellers can influence the price of the commodity in the market.

(ii) The Products are Homogeneous: All the firms in the perfectly competitive market sell homogeneous (identical) products. The products are perfect substitutes for one another.

(iii) Free Entry and Exit to Firms: The industry is characterised by freedom of entry and exit of firms. Firms have freedom of movement in and out of an industry.

(iv) Buyers and Sellers have Perfect Knowledge: Firms have complete knowledge about the product market and factor market. Buyers also have perfect knowledge of the product market.

(i) Large number of sellers means that number of firms are large enough so that contribution to total output of the industry by any individual firm in negligible. So, no single firm is in a position to influence the market price on its own by changing its own output. Thus, price remains unchanged.

(ii) Homogeneous products means that buyers treat products of all the firms as same in all respect as homogeneous products. As such no firm can charge a higher price because no buyers is willing to pay the same. Then market price remains the same for all the firms.

Detailed Answer:

(i) Large number of sellers: The implication is that the proportion of total output produced by a single seller is so insignificant that the seller cannot influence the market price by his own actions by changing the quantity of output it produces. He has no option but to sell at the price determined at the industry level.

(ii) Homogeneous products: In a perfectly competitive market, buyers treat the product produced by different firms as homogenous. So they are willing to pay the same price for products of different firms. No firm, therefore, can charge a price higher than the market determined Price.

A product being perfectly homogeneous implies that all units of a commodity are identical in size, quality, shape, colour, weight, etc. In a state of perfect competition, a perfectly homogeneous product is sold in the market at a uniform price. If ever an individual firm tries to charge higher price, it would lose all its buyers to a large number of other sellers in the market. In a perfectly competitive environment, homogeneous product does not allow a firm any control over its price. Accordingly, firm's demand curve (under perfect competition) becomes a horizontal straight line.

The number of buyers of commodity is very large under perfect competition. It is so large that by varying its demand, an individual buyer can not affect total market demand for a commodity. Accordingly, an individual buyer can not affect market price. He can buy any quantity at the existing price of the commodity. An individual buyer is a price taker.

The large number of buyers is assumed to be so large that an individual buyer’s share in total purchases is so negligible that he cannot influence the market price on its own by purchasing more or less. The outcome is that price remains unchanged.

Control price means price of the good is fixed below its equilibrium price with a view to ensuring some minimum supply of the essential commodities to a targeted group of people. 

Support price is fixed by the government above the equilibrium price with a view to ensuring some minimum income to the farmers. 

Yes. Firm’s demand curve under monopolistic competition is more elastic than under monopoly because of availability of close substitutes under monopolistic competition.

Monopoly is a market form with a single seller and many buyers of a commodity. 

Monopolistic competition is a form of the market with many buyers and sellers, where differentiated product is sold with a partial control over price.

Yes. Monopolist is a price maker because he is the single seller of a commodity with no close substitutes.

Common features of monopoly and monopolistic competition are (i) not a uniform price (ii) imperfect knowledge of market condition (iii) imperfect mobility of factors

Yes. Because market supply may change proportionate to market demand.

When demand decreases, equilibrium price must decrease, other things remaining unchanged.

Yes. Owing to improvement in technology supply of the good in the market will increase causing a rightward shift of the supply curve. Accordingly, equilibrium price will decrease.

When supply increases, equilibrium price will decrease, other things being equal.

Under perfect competition, a firm’s marginal revenue is always equal to price.

Perfect Competition

In such a market whether the firm sells more or less, it does not affect the market price. It makes the average revenue constant as output is increased.

According to marginal average relationship, when AR is constant, MR equals AR throughout.

There are three possibilities:

(a) If the relative (percentage) decrease in demand is greater than the decrease in supply, price will fall. The price will fall because of excess supply in the market.

(b) lf the relative (percentage) decrease in demand is less than the decrease in supply, price will rise.

The price will rise because of excess demand in market.

(c) If the relative (percentage) decrease in demand is equal to the decrease in supply, price will remain unchanged.

The price will remain unchanged because there is neither excess demand nor excess supply in the market.

The firm is called price taker when it has to adopt the price determined by market demand and market supply.

(c) Both (a) and (b)

At the monopoly equilibrium, Price (AR) exceeds Marginal Cost (MC).

The buyers treat the goods produced by different firms as homogenous so that all buyers are willing to pay the same price for the product of all producers of the good. So, no producers is in a position to charge a higher price of the product it producers. A uniform price prevails in the market.

Detailed Answer:

In a perfectly competitive market, buyers treat the product produced by different firms as homogenous. So they are willing to pay the same price for products of different firms. No firm, therefore, can charge a price higher than the market determined Price.

Average Revenue (AR) curve under monopoly is downward sloping.

Average revenue decreases as under monopoly, more of the commodity can be sold by reducing the price of the commodity.

MR is constant at all levels of output.

In monopoly, Marginal Revenue (MR) curve slopes downward and lies below the AR curve.

Perfect Competition.

(b) Equilibrium price is greater than market price.

Price will rise.

True

In a situation of constant demand or perfectly inelastic demand, increase or decrease in supply causes a full impact on price of the commodity but equilibrium quantity does not change.

It is the profit which a firm must earn in the long run to remain in business.

The demand curve is flatter because a large number of substitutes(differentiated product) are sold in this market. 

It is a market situation in which there is a single seller selling a commodity which has no close substitute.

Demand curve under monopolistic market is downward sloping.

Monopolistic Competition is found in the industry where there is a large number of sellers selling differentiated product to a large number of buyers. There is freedom of entry and exit for the firms.

In such a market, a seller has a partial control over price through product differentiation. However, full control over price is not possible owing to the fact that there is a large number of close substitutes in the mark.

Product differentiation implies, that buyers differentiate products of various firms differently. So they are willing to pay different prices for the products of different firms. This product differentiation gives the power to an individual firm to influence the market price on their own.

Detailed Answer:

Product differentiation or differentiated product is a distinct feature of monopolistic competition. Though the number of firms is large but their product differs in colour, shape, brand quality, durability, etc.

It has two important implications:

(i) It allows a firm a partial control over price of its product.

(ii) It causes high elasticity of demand for the firm's product owing to the availability of a large number of close substitutes.

Product differentiation makes monopolistic competition different from perfect competition.

It is down ward sloping & price - elastic. 

It is a market situation where there are large number of sellers selling differentiated products. 

It is downward sloping and price-inelastic. 

It is so because a monopolist can sell more only by reducing price. 

(a) Starts rising.

When government imposes the maximum limit on the price of a commodity, it is called price ceiling.

The ceiling is generally imposed on a good when the government feels that market-determined price is too high for a common man. The need for imposing ceiling arises mostly in case of necessary goods.

Detailed Answer:

Price ceiling: It refers to the maximum price of a commodity that the sellers can charge from the buyers. Often, the government fixes this price much below the equilibrium market price so that the essential commodities are within the reach of the poorer sections of the society. When ceiling price is lower than the equilibrium price, there is likely to be excess demand in the market and vice-versa.

(i) There is only one single seller in the market so that seller can influence the market price on its own.

(ii) There ate no close substitutes so that there is no competition in the market.

(iii) There are barriers to entry of new firms so that the seller, if getting above normal profits, can continue to get abnormal profit.

Detailed Answer:

(i) Single seller: A monopoly market has a single seller of the commodity. This single person has complete control over the output of the commodity. So, in this sense it is price maker also.

(ii) No close substitutes: All the units of a commodity are similar and there are no close substitutes of that commodity.

Yes. Often, higher price is fixed when elasticity of demand is low. Low price is fixed when elasticity of demand is high.

The feature implies that there are no barriers to the entry of new firms in the industry. The implication is that each individual firm is able to earn only normal profit in the long run. If the firms are earning above the normal profit, new firms enter, raise supply, which brings down the price and reduces profit till the firm earns just the normal profit. In case, the firms are facing losses, opposite happens till the losses are wiped out.

Yes. A monopolist can charge different prices for the same commodity from different buyers because of no close substitutes of his product.

False. Under monopolistic competition firm is a price maker and due to close substitute available in the market the demand curve is more elastic than monopoly but not perfectly elastic demand curve.

Buffer stock is an important tool in the hands of government to ensure price floor/minimum support price. If in case, the market price is lower than the government feels should be given to the farmers/producers it would purchase the commodity at higher price from the farmers/ producers so as to maintain stock of the commodity with itself to be released in case of shortage of the commodity in future.