However, because a monopoly faces no competition, its situation and its decision process will differ from that of a perfectly competitive firm. We can analyze the pattern of costs for the monopoly within the same framework as the costs of a perfectly competitive firm-that is, by using total cost, fixed cost, variable cost, marginal cost, average cost, and average variable cost. How will this monopoly choose its profit-maximizing quantity of output, and what price will it charge? Profits for the monopolist, like any firm, will be equal to total revenues minus total costs. Explain allocative efficiency as it pertains to the efficiency of a monopolyĬonsider a monopoly firm, comfortably surrounded by barriers to entry so that it need not fear competition from other producers. Calculate marginal revenue and marginal cost.Analyze a demand curve for a monopoly and determine the output that maximizes profit and revenue.Explain the perceived demand curve for a perfect competitor and a monopoly.By the end of this section, you will be able to:
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