Answer to Question #314042 in Economics of Enterprise for ABI

Question

1. define production function and cobb-Douglas production function

2. what do we mean by an expansion path?

3. mention the characteristics of monopoly, oligopoly, and monopolistic competitive and perfectly competitive market structure and make a comparison

Answer 1

1.In economics, a production function is an equation that describes the relationship between input and output, or what goes into making a certain product, and a Cobb-Douglas production function is a specific standard equation that is applied to describe how much output two or more inputs into a production process make, with capital and labor being the typical inputs described

2.In economics, an expansion path (also called a scale line) is a curve in a graph with quantities of two inputs, typically physical capital and labor, plotted on the axes. 

• 3.There are four types of competition in a free market system: perfect competition, monopolistic competition, oligopoly, and monopoly.
• Under monopolistic competition, many sellers offer differentiated products—products that differ slightly but serve similar purposes. By making consumers aware of product differences, sellers exert some control over price.
• In an oligopoly, a few sellers supply a sizable portion of products in the market. They exert some control over price, but because their products are similar, when one company lowers prices, the others follow.
• In a monopoly, there is only one seller in the market. The market could be a geographical area, such as a city or a regional area, and does not necessarily have to be an entire country. The single seller is able to control prices.
• Most monopolies fall into one of two categories: natural and legal.
• Natural monopolies include public utilities, such as electricity and gas suppliers. They inhibit competition, but they’re legal because they’re important to society.
• A legal monopoly arises when a company receives a patent giving it exclusive use of an invented product or process for a limited time, generally twenty years.