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Monopoly price
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In microeconomics, a monopoly price is set by a monopoly. A monopoly occurs when a firm lacks any viable competition and is the sole producer of the industry's product. Because a monopoly faces no com
Reduction in price increases the quantity demanded, but reduces payments by those who would be willing to pay a higher price: MR < P
Reduction in price increases the quantity demanded, but reduces payments by those who would be willing to pay a higher price: MR < P
Diminishing marginal product ensures the rise in cost from producing an additional item (marginal cost) is always greater than the average variable (c
Diminishing marginal product ensures the rise in cost from producing an additional item (marginal cost) is always greater than the average variable (controllable) cost at that level of production. Since some costs cannot be controlled in the short run, the variable (controllable) costs will always be lower than the total costs in the short run.
A monopolist will set a price and production quantity where MC=MR, such that MR is always below the monopoly price set. A competitive firm's MR is the
A monopolist will set a price and production quantity where MC=MR, such that MR is always below the monopoly price set. A competitive firm's MR is the price it gets for its product, and will have Price=MC.
Monopolistic competition
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Monopolistic competition is a type of imperfect competition such that there are many producers competing against each other but selling products that are differentiated from one another and hence not
Short-run equilibrium of the company under monopolistic competition. The company maximises its profits and produces a quantity where the company's mar
Short-run equilibrium of the company under monopolistic competition. The company maximises its profits and produces a quantity where the company's marginal revenue (MR) is equal to its marginal cost (MC). The company is able to collect a price based on the average revenue (AR) curve. The difference between the company's average revenue and average cost, multiplied by the quantity sold (Qs), gives the total profit. A short-run monopolistic competition equilibrium graph has the same properties of a monopoly equilibrium graph.
Long-run equilibrium of the company assuming monopolistic competition. The company still produces where marginal cost and marginal revenue are equal;
Long-run equilibrium of the company assuming monopolistic competition. The company still produces where marginal cost and marginal revenue are equal; however, the demand curve (MR and AR) has shifted as other companies entered the market and increased competition. The company no longer sells its goods above average cost and can no longer claim an economic profit.