Wednesday
April 23, 2014

Homework Help: Microeconomics

Posted by James on Sunday, October 29, 2006 at 10:39pm.

"In both monopoly and perfect competition the profit maximising output is at the level at which MR = MC, but only in the latter is the optimum output level such that P = MC"


Explain the above statement by comparing the model of perfect competition with that of monopoly.



Thanks :o)

Under the perfect competition model, the demand curve faced by an individual producer is flat (horizontal). The assumption is that the producer is such a small player in the industry, nothing he does will affect the overall supply and thus the equilibrium price. That is, for a perfect competitor, price is given. So, price becomes marginal revenue.
Not true with a monopolist. He faces a downward demand curve, which generates a downward marginal revenue curve. Further, he can manipulate the price by adjusting his own output.

I hope this helps.

Answer this Question

First Name:
School Subject:
Answer:

Related Questions

Microeconomics :o) - "In both monopoly and perfect competition the profit ...
Economics - Heres one IM SURE economist will enjoy... Always saying MC = MR :) ...
Microeconomics - monopoly vs perfect competition - This is a good and fun ...
Microeconomics - If a monopoly is producing at an output where its average total...
econ - Market demand facing a monopolist is Qd=-5P+20. If the monopoly practices...
Business Economics - When we are given an expression for the Short Run Total ...
Economics - A monopolist is in long-run equilibrium and earning economic profits...
Help-Econ - Okay, this is due Tuesday. I'm woking on it but if anyone can help ...
Economics - 50. In both monopolistic competition and non-price-discriminating ...
Economics(micro) - hey, could someone please give me some tips for the following...

Search
Members