Question

1. What economic condition must a monopoly fulfill in order for it to maximize its profits?

2. Eli Lily and Company held a patent on a medical drug it sold to the public. When Lily’s patent expired what would you predict will happen to the price of its product?

3. A price discriminating monopoly charges the lowest price to its customers when they have what type of characteristic?

4. If a government regulatory commission seeks to achieve the most efficient allocation of resources to this line of production, the price should equal what economic measure?

5. The monopolistic competitive firm has some control over the price of its product but not as much control as a monopoly. Explain why.

6. A monopolistic competitive business is not economically efficient but yet we allow this type of business to operate. What major benefit does a monopolistic competitive industry provide society?

Answer 1

SOLUTION :

Condition that maximize it's profits in case of Monopoly:

A Monopoly is a firm that sells all of the goods and services in a given market.while in monopolistic market can charge any price for its product , that price is constrained by demand for the firms product. . In monopoly market protected by high barriers to entry and exit .consumers require to purchase the product. the monopolistic firm in the market , it's demand curve is the same as the market demand curve ,which is unlike that for a perfectly competitive firm , downward -sloping. so , we can say that monopoly can maximize it's profits.

conditions that exist after expire of patent right :

Eli Lily and company held a patent on medical drug and sold it to public. here the person who is owning the pantent can sold to anyone else , who will then become the new owner of the patent . the protection ends , and an invention enters the public domain , i.e, anyone can commercially exploit the invention without  infringing the patent .

After the patent period expires the medical drug prices will be decreases.

" THE TERM OF AN PATENT CAN BE SAID SHALL NOT END BEFORE THE EXPIRATION OF A PERIOD OF 20 YEARS COUNTED FROM THE FILING DATE " .

A Price Discriminating monopoly is a single entity that charges different prices from consumers that which is not associated with cost to provide the product or services for different consumers .

In competitive market , Price discrimination occurs when identical products sold at different prices by the same provider , in a pure price discrimination , the seller will charge absolute maximum price what he was willing to pay.

In conditions of which is potencial and beneficial to consumers , such as lower prices will chare to maximize the sale for the bussiness.

If a government regulatory commision to seek to achieve the efficient allocation of resoures :

In the competitive market when the demand and supply for the rawmaterials is scarcity, in emergency the governments involves in the perfect competitve market and made an regulatory commision. an efficient allocation of resources is that combination of inputs and outputs .

the distribution of inputs and outputs such that any change in economy make something better economic measures.

AN MONOPOLISTIC COMPETITIVE MARKET HAS SOME CONTROL OVER THE PRICE AND PRICE DISCRIMINATION &BENEFIT OF EXIST  MONOPOLISTIC INDUSTRY

An monopolistic competitive market is the kind middile of the market between perfect competitive market and monopoly . An monopolistic competition characterised an industry in which many firms offer products or services that are similar , but not perfect substitutes. these markets pefectly barriers to entry and exit in a monopolistic competitive market are low. in monopolistic competitive industy decisions does not affect those competitiors. In monopoly market conditions price will always higher than the competitive price . but , it is essential for the monopoly price to be higher than the competitive price. why because monopoly marginal revenue is always below the demand curve , the price will always be above the marginal cost at equilibrium will makes to earn economic profit .

A monopolistic competitive firm is not efficient even though it has a consumer surplus and higher prices than other competitors and it' s production is lower of average costs .In a monopolistic competitive market consumers have more consumer surplus other than competitors .

In monopolistic competitive market an price discrimination is exist for the maximize the profits and expansion of the bussiness , the price discrimination will helps the market to consumer will gain more consumer surplus .

When the monopolistic price discrimination exists the price of a product differs from product to product and consumer to consumer . so , we can expand the demand for the product and it will gain the market expansion and it will beneficial to the consumers. By these markets an ordinary consumer also can pay what he desires to pay for the product.

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