MSFT 1a) Microsoft competes in a number of different market types, depending on the product (Tomlinson, n.d.). In most markets, Microsoft competes in a market characterized by monopolistic competition, with several differentiated players competing for the same business. This is true of operating systems (vs. Apple, Linux); video game consoles (vs. Nintendo, Sony); and servers. For some of its software applications, such as the Office suite, Microsoft's market is a duopoly is not an outright monopoly as most competitors are so far below Microsoft's standard they are barely competition, and are offered for free as a result.

b) Microsoft stock is traded on NASDAQ. This is a market characterized by monopolistic competition, with thousands of investments, all differentiated from one another, competing against each other. The market also has a degree of asymmetric information, and is highly liquid so it reflects publicly known information accurately.

c) The demand curve...

The higher the price of the stock, the less demand there will be for shares of Microsoft. This is because there are low switching costs, good information about MSFT and competing stocks, and because consumers are price sensitive with respect to the price of MSFT stock because they have a sense of the value of the company and compare the stock price to that estimation of value.
2. a) Competition keeps gas stations from raising their prices because consumers demonstrate some degree of price sensitivity. While this is low with respect to total demand, it is high between gas stations. The reason this is possible is that there are no switching costs for most consumers. They can freely choose between gas stations for their fuel needs. Because gasoline is an undifferentiated product, consumers will choose the gas station with the lowest possible price. Consumers are typically well-informed about the price of gas as well. Thus,…