Both (a) and (b)

Market of good A is perfectly competitive, because there is no change in the price, which is assumed to be given as ~ 5 at various levels of output. Market of good B may be monopoly or monopolistic competitive market (Imperfect in nature) because in order to sell more of the commodity, the seller has to reduce price.

Selling costs are the costs incurred by a firm to promote its sales.A firm under perfect competition sells homogeneous products and faces a horizontal straight line demand curve.It can sell whatever amount it wishes to sell at the existing price.So, selling costs are not required.

It is correct that firm under monopolistic competition generates an excess quantity however,  it is not a wastage of scarce resources as firms under this form of market produces differentiated goods.
So, there are certain consumers who always prefer to consume goods of a particular brand or quality.Hence firm's output will be sold and there will be no wastage. Also, it helps firms to meet with unforeseen circumstances.

Under monopolistic market, firms are free to enter the industry or leave the industry however, new firms have no absolute freedom of entry in the industry.Products of some firms may be legally patented.New firms cannot produce those product, e.g. no rivial firm can produce or sell a patented item like Woodland shoes.
Still new firms may join any industry if they expect to earn profit.Similarly, a loss making firm may easily leave the industry.

There are two approaches to determine producer's equilibrium:
(i) Marginal Revenue and Marginal Cost approach
(ii) Total Revenue and Total Cost approach
Under Total Revenue and Total Cost approach, it is assumed that a producer would be at equilibrium at a point where he is earning maximum profits. Accordingly, his equilibrium is struck at that level of output, where the difference between Total Revenue and Total Cost is maximum.

Elasticity of Demand measures the degree of responsiveness in quantity demanded due to change in own price of the product(price elasticity) or change in the income of the consumer(income elasticity)or change in the price of related goods(cross elasticity).There are many factors that affect Elasticity of Demand and market form is definitely an important factor affecting Elasticity of Demand.

Elasticity of Demand in different market forms is given below:

Related goods are of two types:

(i) Substitute goods These goods can be used one in place of another, like tea and coffee.

(ii) Complementary goods These goods have to be used together in a fixed proportion like car and petrol.

So, from the above table, we can interpret that substitute goods exhibit a positive cross price elasticity for demand and negative cross price elasticity of supply.On the other hand, complementary goods exhibit a negative cross price elasticity for demand and positive cross price elasticity of supply.

The Law of Diminishing Marginal Utility was propounded by Marshall and it states that as a consumer consumes successive units of an identical commodity, then Marginal Utility derived from an additional unit goes on declining.This implies that as a consumer's utility is declining, then he would not be willing to buy an additional unit at the same price.But, if the good is offered to him at a reduced price, then this will induce him to increase his consumption and lead to the fulfillment of Law of Demand which states that as price falls, demand increases and vice-versa.So, we can say that the above statement is correct.Law of demand definitely operates due to Law of Diminishing Marginal Utility.

(a)   Quantity demanded = 160 - 2p

Quantity supplied = -40 + 2p

Equlibrium is attained at a point where market demand is equal to market supply, i.e.

Quantity demanded = Quantity supplied

Hence,            \(160-2p=-4p+2p\\ 160+40=2p+2p\\ 200=4p,\quad p=\frac { 200 }{ 4 } =50\)

Hence, equilibrium price = Rs.50

Equilibrium quantity will be,

Quantity demanded = Quantity supplied

\(=160-20=160-2\times 50\\ =160-100=Rs.60\)

(b)  At any price below the equilibrium price, there will be excess demand.

Let us take at price Rs.20

At p = Rs.20

    \(Quantity\quad demanded\quad =160=-2p\\ \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad =160-2\times 20=160-40\\ \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad =Rs.120\\ Quantity\quad supplied\quad =\quad -40\quad +\quad 2p\\ \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad =\quad -40\quad +\quad 2\times 20\quad =\quad -40\quad +40\\ \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad =0\)

Quantity demanded

> Quantity supplied [ excess demand]

Also, it can be concluded that at Rs.20 there will be no supply of the commodity, hence between 20 < p < 50, there will be excess demand.

(c)  At any price above equilibrium, there will be excess supply.

Let us take at price Rs.80

\(Quantity\quad demanded\quad =160-2p\\ \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad =160-2\times 80=160-60\\ \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad =0\\ Quantity\quad supplied\quad =-40+2p\\ \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad =-40+2\times 80=-40+160\\ \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad =120\)

Quantity demanded

<Quantity supplied [excess supply]

Also, it can be concluded that at p=Rs.80 demand will be zero, hence there will be excess supply between 50 < p < 80.

(a) At equilibrium price, q^d = q^s
                            1000-p = 700+2p
                                  3p = 1000-700
                                  3p = 300
                                   \(p=\frac { 300 }{ 3 } \)
                                    p = 100
Equilibrium price = RS.100
Now we put the value of equilibrium price into either the demand curve equation or the supply curve equation
               Q^d=1000-p=1000-100=900
or            Q^s=70+2p=700+2(100)=900
Thus, the equilibrium quantity is 900 units.
(b) Now when the price of input used increases, then the new supply curve becomes
                 Q^s=400+2P (New supply curve)
Now for equilibrium, Q^d = Q^s (New)
∴                        100-p = 400+2p⇒3p=1000-400
                              3p = 600
                               \(p=\frac { 600 }{ 3 } \) 
⇒                             p = 200
Equilibrium price = RS.200
Substituting p = 200 into either demand or new supply equation, we get
Equilibrium quantity      = 1000 - p = 1000 - 200
                                   = 800 (Demand side)
or Equilibrium quantity   = 400 + 2p
                                   = 400 + 2 \(\times \) 200
                                   = 800 (Supply side)
Thus, the equilibrium price increases and equilibrium quantity falls due to rise in the price of inputs.
(c) Not in Syllabus.

When the price of input used in the production of a commodity X increases, it will increase its cost of production, reduce his profit earned and thereby its supply shall fall in the market and vice versa, i.e.,
\(P_{ Input }\uparrow \{ CoP\uparrow Profit\downarrow \} S_{ X }\downarrow \\ P_{ Input }\downarrow \{ CoP\downarrow Profit\uparrow \} S_{ X }\uparrow \)
Explaining the above analysis with the help of a diagram given below:

(a) When the price of input rises it leads to a "decrease" in the supply of the given commodity. This is shown by the "leftward shift" of the given supply curve SS' of S₀S₀. Point X₁ is the new point of equilibrium (∵ of the intersection of the new supply curve S₀S₀ with the given demand curve DD').
OP₁ denotes the new equilibrium price, which is greater than the original equilibrium price OP. OQo denotes the new equilibrium quantity which is lesser than the original equilibrium quantity OQ.
Similarly, when the price of input falls this will lead to an "increase" in the supply of the given commodity i.e.,
\(P_{ Input }\downarrow \{ CoP\downarrow Profit\uparrow \} S_{ X }\uparrow \)
This increase in the supply is graphically shown by the "Rightward Shift" of the given supply curve SS' to S₁S₁ in the above diagram. Point Xo is the new point of equilibrium (∵ of the intersection of the new supply curve S₁S₁ with given demand curve DD') OP₀ denotes the new equilibrium price, which is lesser than the original equilibrium price of OP and OQ₁ denotes new equilibrium quantity which is greater than the original equilibrium quantity OQ.

Government has kept Indian railways as its monopoly not for the profit motive but for social welfare. Government wants all sections of the society to use this mode of transport. That is why price charged is kept low as compared to other modes of transport.

Case I. When both demand and supply of a commodity simultaneously increase. When both demand and supply of a commodity increase in equal proportion, then there is no change in equilibrium price but the equilibrium quantity will increase.
In the diagram, supply increases, so, the supply curve shifts from SS to S₁S₁ and demand increases, so, the demand curve shifts from DD to D₁D₁. Both demand and supply increase in equal proportion, therefore equilibrium price remains unchanged at OP but equilibrium quantity increases from OQ to OQ₁.
Case II. When both demand and supply of a commodity simultaneously decrease. When both demand and supply of a commodity decrease in equal proportion, then there is no change in equilibrium price but the equilibrium quantity will decrease.
In the diagram, supply decreases, so, the supply curve shifts from SS to S₀S₀ and demand decreases, so, the demand curve shifts from DD to D₀D₀.Both demand and supply decrease in equal proportion, therefore, the equilibrium price remains unchanged at OP but the equilibrium quantity decreases from OQ to OQ₀ .

Difference between collusive and non-collusive oligopoly

Features of oligopoly

Oligopoly market exhibits the features given below

(i) A few firms a few firms, but large in size dominate the market for a commodity.Each firm commands a significant share of the market which can impact market price of the product.

(ii) Non-price competition Under oligopoly, firms tend to avoid price competition. e.g. in India, both Coke and Pepsi sell soft drink at the same price.However, in order to enhance its share of the market, each firm tries to resort to non-price competition.