The Dynamics of Imperfect Markets Questions and Answers Grade 12

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Imperfect markets do not meet the rigorous standards of a hypothetical perfectly or purely competitive market. 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.

The Dynamics of Imperfect Markets Questions and Answers Grade 12

On this page we are going to Discuss The Dynamics of Imperfect Markets Questions and Answers for 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

act1

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

[20]

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

[20]

Activity 3
Study the following graph and answer the questions that follow:

  1. Define the term imperfect market. (2)
  2. Motivate why the above graph indicates short-term equilibrium. (4)
  3. Which point on the graph indicates profit maximisation? (2)
  4. Calculate the economic profit. (6)
    [14]
Answers to activity 3

  1. An imperfect market occurs where the market price is not a pure
    reflection of the scarcity of that product. (2)
  2. The firm is producing where SMC = MR and is therefore in
    equilibrium in the short term. (4)
    The slope of the curves indicates a short run.
  3. d where MR = MC (2)
  4. Income = Price (15) × Quantity (100)
    = R1 500
    Cost = Cost (10) × Quantity (100)
    = R1 000
    Economic profit = Income (R1 500) – Cost (R1 000)
    = R500 33 (6)
    [14]

 

VIDEO:Economics Grade 12 Dynamics of Imperfect Market

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