The Dynamics of Imperfect Markets Economics Grade 12 Questions and Answers. Imperfect markets are characterized by having competition for market share, high barriers to entry and exit, different products and services, and a small number of buyers and sellers. Perfect markets are theoretical and cannot exist in the real world; all real-world markets are imperfect markets
THE DYNAMICS OF IMPERFECT MARKETS QUESTIONS AND ANSWERS GRADE 12
Activity 1
Use the table below of a typical monopolist and plot the revenue curves on the same set of axes. Notice the position of the Marginal revenue curve in relation to the Demand curve.
| Price | Quantity | Total revenue | Average revenue | Marginal revenue |
| – | 0 | 0 | 0 | 0 |
| 100 | 1 | 100 | 100 | 100 |
| 90 | 2 | 180 | 90 | 80 |
| 80 | 3 | 240 | 80 | 60 |
| 70 | 4 | 280 | 70 | 40 |
| 60 | 5 | 300 | 60 | 20 |
| 50 | 6 | 300 | 50 | 0 |
| 40 | 7 | 280 | 40 | -20 |
| 30 | 8 | 240 | 30 | -40 |
Activity 2
Complete the following table by filling in the missing information:
| Characteristics | Perfect market | Monopolistic competition | Oligopoly | Monopoly |
| So many competitors that a singlebusiness cannot influence the market price | So few competitors that each business takes the actions of the others into account | |||
| Market entry | Completely free | Free | ||
| Downward sloping | ||||
| Long-term economic profit | Positive | |||
| Seller market power | ||||
| Control over price | Some control | Considerably more than oligopoly | ||
| Examples | Fast-food outlets | Eskom |
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Answer to activity 2
| Characteristics | Perfect market | Monopolistic competition | Oligopoly | Monopoly |
| Number of businesses | So many competitors that a single business cannot influence the market price | A very large number | So few competitors that each business takes the actions of the others into account | One business |
| Market entry | Completely free | Free | Free to restricted | Blocked |
| Demand curve | Slopes from left to right | Downward sloping | Downward sloping | Downward sloping = market demand |
| Long term economic profit | Normal profit | Normal profit | Positive | Positive |
| Seller market power | None, price-taker | Some | A whole lot | Many (price-maker) |
| Control over price | None | Few | Considerable | Considerably more than oligopoly |
| Examples | Gold and oil | Fast-food outlets | Petrol and oil | Eskom |
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Activity 3
Study the following graph and answer the questions that follow:
- Define the term imperfect market. (2)
- Motivate why the above graph indicates short-term equilibrium. (4)
- Which point on the graph indicates profit maximisation? (2)
- Calculate the economic profit. (6)
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Answers to activity 3
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