Economics

Monopoly and Perfectly Competitive FirmA monopoly occurs when in that respect is only one pissed producing a one-of-a-kind product for an entire market . The product is not easily replaceable or even substitutable . That is , on that point is no similar penny-pinching which can be apply to substitute for the good and the entry of new sign of the zodiacs which might make do with the profligate is not possible . A monopoly is possible because of the lordly patent rights , legal restrictions , huge unrecoverable costs , realise of an exceptional fundamental resource , artificial barriers to entry , proficient advantage and extensive economies of scale . To be able to increase the profit , a monopolistic firm should look out a basic condition , the Marginal Revenue (MR ) should be contact to the Marginal Cost (MC (Varian , 2003The profit maximizing condition is succeed by starting with the basic equating , revenue (R ) have-to doe withs the expenditure (P ) multiplied by the quantity (Q ) of the good sold (Rx Q . emolument can be represented with the equation for an comparability , there is a need to obtain the partial derivative of the extend toity . Computing for the partial derivative of the equation (R C the equation would become MR MC . MR , which is the extra revenue obtained from each additional unit of create sold provide become equal to the MC , which refers to the additional cost incurred for an additional unit of output produced . This condition is considered to be maximized because if a monopolist increases the output by a unit , it is followed by two effects on revenues . It definitely will sell more output , nitty-gritty an increase in revenue will also follow .

However , this increase in output will thrusting the expenditure of the product to go down , and if the terms of the good goes down , every products price is affected and the revenue that will be generated will turn out to be slight than when the output was retained (Varian , 2003The monopolist may also favour to decrease price to be able to increase gross revenue . In turn , this will be decreasing the price of all the products In addition , the probable reason as to why a monopolist will decrease the price is to monopolize the whole market . However , the monopoly is already a monopoly (Varian , 2003On the other hand , a arrant(a)ly competitive firm is wherein a number of firms are competing with each other with equal opportunities . Its characteristics include : the market powerful enough not to be affected by buyers and sellers , a homogeneous product is macrocosm sold , absence of artificial restraints or controls , perfect mobility of goods and resources and perfect information (Costales et . al , 2000yo /ooYKLMOPyh -h -h -P MR MC is not satisfied , the firm is incurring losses (Costales et . al , 2000ReferencesCostales , A . C , Bello , A . L , Catelo , M . A . O , Cuevas , A . C Galinato , G . I Rodriguez , U .-P . E (2000 . : Principles and Application : JMC twinge , IncVarian , H . R (2003 . Intermediate Microeconomics 6th ed : W . W...If you want to get a full essay, order it on our website: Ordercustompaper.com

If you want to get a full essay, wisit our page: write my paper