Question

The market price in a perfectly competitive market is $11, and 1,250 units are bought and sold. Assume the market becomes monopolized. What would you expect to happen to the market price

Answer 1

When the price of a commodity is $11, where 1250 units are being bought and sold in a perfectly competitive market, the market price of the commodity will increase from its original price if the market is monopolized.

What is a perfectly competitive market?

In a market where there are less to zero restrictions for entry and exit of buyers and sellers in the market dealing in similar commodities, then such a market is known as a perfectly competitive market.

There is no pricing power in the hands of the buyers and sellers in the market, as there is no minimum or maximum limit on the number of sellers in the market, so the supply is not restricted in such a market.

Hence, it can be concluded that market prices are stable in a perfectly competitive market, and it generally increases in a monopolistic market.

Learn more about a perfectly competitive market here:

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