Monopoly and Pure Competition It is often said that through production we understand cost.

Monopoly and Pure Competition

Question 1: It is often said that through production we understand cost. What does it mean especially in terms of iso-cost/-quant curves and law of diminishing return?

Question 2: Why Pepsi's strategy of price reduction in 1930's was a right strategy while Wang Lab's decision to raise price in 1990's was not. Incorporate elasticity concept in the case of Pepsi's price reduction strategy and shape of cost curves in the case of Wang Lab's price increase.

Question 3: What is the basis of using learning curve strategy in pricing and increasing market share? Please refer to my power point lecture note on stage of production cycle and virtual cycle.

Question 4: Monopoly and Pure Competition - Discuss pros and cons of Monopoly and Pure (or Perfect) Competition. To be specific, what are advantages and disadvantages of Monopoly vis-a-vis Perfect (Pure) Competition? Why does a monopolistic firm (or monopolist) have market power while firms under perfect competition do not?

Question 5: Price Wars - In which market structure (choose one from Pure Competition, Monopolistic Competition, Oligopoly and Monopoly) is price war most likely and why?

Question 6: Competition and Efficiency - Use your understanding of pricing and output decision under different market structures, combined with the concepts of cost/production, to explain how the rationing function of price (in short run) and signaling function of price (in long run) you learned in Module I perform their function in encouraging competition and efficiency in market economy?