What are the assumptions of a perfectly competitive market?

1)   

(i) What are the assumptions of a perfectly competitive market? [20 marks]

(ii) Contrast it with that of a monopoly. [20 marks]

Address the points provided below where applicable:

• Number of buyers and sellers
• Barriers to entry
• Control over price charged

2)   

(i) Explain the concept of a negative externality. [15 marks]

(ii) What are the policies a government can adopt to mitigate the effects of externalities? [15 marks]

3)   

(i) Explain the four components of Gross Domestic Product (GDP) and how the Covid-19 pandemic has affected the GDP of the United Kingdom. [10 marks]

(ii) What components of the United Kingdom’s GDP (if any) would each of the below transactions affect? Provide an explanation for each.

a)    Boris Johnson buys a new pair of shoes for personal use. [5 marks]

b)    The current British government pays the salaries of government workers. [5 marks]

c)    GlaxoSmithKline decides to open a new manufacturing plant in Leeds. [5 marks]

d)    Your Economics and International Trade lecturer buys Parmigiano cheese (a type of Italian cheese) made in Italy, but sold in the United Kingdom. [5 marks]