Graphically illustrate a monopoly (or the imposition of monopoly power on a market from government intervention)...

Graphically illustrate a monopoly (or the imposition of monopoly power on a market from government intervention) via two cases: 1) quantity (output) restrictions 2) price too high

Solutions

Expert Solution

Monopoly market is the market of one seller. Monopoly is highest degree of imperfect competition. No close substitutes are available in the market. Demand curve faced by monopolist is in elastic. In monopoly firm and industry are same. Entry is blocked in monopoly market. Monopoly attain maximum profit only because entry of new firms are blocked. Average revenue curve (demand curve ) and marginal revenue curve of monopoly is negatively sloped curve. It shows in order sell extra unit of commodity ,monopoly has to reduce its price Unlike perfect competition AR is not MR in monopoly market. A monopolist will never produce an output with elasticity less than one. The maximum output sold by a monopoly where elasticity is equal to one. The minimum price fixed by monopoly at a price where elasticity is equal to one. Monopoly earn super normal profit , normal profit or losses during short run. But it earns super normal profit in long run Monopoly fixes its price greater than marginal cost to reap more profit. Monopoly firm's price ans output are determined when Marginal revenue is equal to Marginal cost. The best level of output is OQ where MC curve intersects MR curve from below. Monopoly determines his output and price only when AC is diminishing. The best level of output is always less than the output stated by Price is equal to marginal cost The best level of output under monopoly is the output less than the output at minimum AC. Here the firm earns abnormal profit

Rahul Sunny answered 11 months ago

Next > < Previous

Related Solutions

(a) Use the market diagram to illustrate the imposition of a rent ceiling above the market...

(a) Use the market diagram to illustrate the imposition of a rent ceiling above the market equilibrium price. What can you explain from the graph? (b) The equilibrium price in the housing market is very high. What do you think will happen if the government imposes a very high price ceiling that is below but very close to the equilibrium price on the housing market, because a politician owns housing units in certain areas? How does that affect the poor...

Graphically illustrate the effect of an increase in government purchases

Graphically illustrate the effect of an increase in government purchases. Explain the government spending multiplier effect by using at least 200 words.

First, read the attached article. What’s worse: monopoly power or government intervention? Politicians of all stripes...

First, read the attached article. What’s worse: monopoly power or government intervention? Politicians of all stripes increasingly agree with Karl Marx on one point – that monopolies are an inevitable consequence of free-market capitalism, and must be broken up. Are they right? Stuart Watkins isn’t so sure. by: Stuart Watkins 1 OCT 2020 MoneyWeek Free markets left to themselves in a capitalist context are great at producing wealth, but will inevitably tend to concentrate that wealth in ever fewer hands,...

Illustrate graphically a situation in which a monopoly is welfare improving and explain briefly

From the point of view of a government concerned with economic inequality and/or with monopoly power,...

From the point of view of a government concerned with economic inequality and/or with monopoly power, (how) would you amend this calculation of social surplus (when a project purchases an input from a monopolist)? Discuss in a short paragraph.

Describe government efforts to address market failure such as monopoly power, externalities, and public goods

State and explain three reasons for potential government intervention in cases of market failure government intervention...

State and explain three reasons for potential government intervention in cases of market failure government intervention – provide an example for each of the three reasons you identify

Define monopsony. What does it mean to have monopsony power? Illustrate graphically a monopsonist in the...

Define monopsony. What does it mean to have monopsony power? Illustrate graphically a monopsonist in the labor market. In your graph, depict the difference between the quantity hired by the firm exhibiting monopsony power and what the market would look like if it were competitive.

Explain why government intervention is important to stabilize the market?

Explain why government intervention is important to stabilize the market? Due to the Covid-19 pandemic, the government of Malaysia has introduced several initiatives since April 2020 and Malaysia Budget 2021. Discuss how these initiatives give impacted you.

The existence of a market failure often invites for government intervention in a particular market. It...

The existence of a market failure often invites for government intervention in a particular market. It is generally recommended that governments should play a facilitating role rather than a direct role in markets. Regulatory interventions should be limited. Appropriate interventions should have three general aims. To improve market infrastructure, Interventions infrastructure would target, Roads, Rail, market-facilities, water points and Health-control infrastructures. To improve information is important for facilitating effective marketing. To improve institutional infrastructure is the most important government role...

Subjects