ECO201: Assume that the Rice Market is Perfectly Competitive and at its long-run Equilibrium Initially.: Managerial Economics Assignment, SUSS, Singapore

Question 2
(a) Assume that the rice market is perfectly competitive and at its long-run equilibrium initially. Due to a breakthrough in green technology, a better rice plantation method is discovered which significantly reduces the marginal cost of rice production, resulting in all rice producers making a profit in the short run.
Examine the rice market structure and analyze with a suitable rice market diagram and an individual rice producer diagram. Discuss the initial equilibrium, the short-run equilibrium, and the eventual long-run equilibrium in the rice market. You will need to figure out the shapes of the market demand and supply curves when you draw the rice market diagram.

(b) Evaluate the validity of the following statements regarding monopoly. Analyze and justify your answers.

(i) A monopolist with a linear demand curve will never operate at the portion of
the demand curve that is inelastic. It will always operate at the midpoint of the
demand curve.

(ii) If there are substantial economies of scale to exploit, a monopolist will be more productively efficient than many competitive firms in the market, and a monopolist will also be allocative efficient.