Question

As a manager, would you prefer your business to be in a monopoly position or a perfectly competitive market? Why? Support your views with examples.

Answer 1

As a manager i prefer my business to be in monopoly position because monopoly is price maker and can charge higher prices from consumer and can earn abnormal profit in short run also there is barrier in entry and exit of firms so there will be less competition in market and i can do price discrimination with consumer to earn more profit.In perfect competition firm is price taker and cannot influence price if it charge higher price no one can buy product from a perfect competitive firm because there are large number of buyers and sellers and they have perfect knowledge about market price and also in short run perfect competitive firm can earn normal profit.suppose there is a company which have their own operating system they can charge higher price because other phone company doesn't have that operating system so it has monopoly in the market and can earn abnormal profit in short run also influence price.and other side there is perfect competitive market like agriculture market they have close substitute present in the market every one charge same price if one seller reduce price for selling more quantity other also reduce prices and no one can earn abnormal profit in short run also they cannot influence price and cannot charge higher price for more profit.

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