The dominant firm then produces enough to satisfy the residual market demand. Complication: Take note that the demand curve above is the total demand curve by all consumers in the market, as if one firm's output affects the price by lowering it with every additional output sold. Long-run equilibrium for the typical monopolistically competitive firm is characterized by price equal to average cost at the chosen level of output. Additional production eventually becomes ever more costly as output levels grow. As such, the firm moves alon … g it's marginal cost curve in response to alternative prices. To answer why the supply curve has a positive slope, we must understand the nature of supply and what the curve represents.
With perfect price discrimination, a monopolist will charge each consumer a different price. Other things equal, a monopolist hires fewer workers than would be hired if the industry were perfectly competitive because the monopolist equates the wage rate with its marginal revenue product rather than its marginal value product. Because the two demand curves have different shapes and slopes, the two levels of output are sold at the same price, p 2. Prices of other goods produced, which have two possible relationships: a When the price of a substitute in production rises falls , the supply curve for the good shifts leftward rightward. The relationship between price and quantity supplied is positive or direct. The input demand curve is more elastic the more elastic the supply curves of other inputs. The marginal revenue curve of a monopolist lies below the demand curve because the monopolist must lower price on all units sold in order to sell additional units.
Which of the following is not necessarily true at the profit-maximizing quantity for a monopolist? A change in supply also affects the price and quantity of the product. Consumer surplus is less in monopoly, but producer surplus is greater. Which of the following conditions is needed for a monopolist to charge different prices in each of two different markets? Wisely, you stop producing or selling additional output you are monopolist remember when these two equalize. Intertemporal price discrimination is a form of third-degree price discrimination With peak-load pricing, a firm charges a different price in each period, since its marginal cost varies in each period. Which of the following is not necessary for a firm to effectively price discriminate? An important difference between monopoly and a competitive industry is that the monopoly does not have a supply curve. The Cournot model of oligopoly shows how uncoordinated output decisions of rivals could interact to produce an equili-brium between the competitive and monopoly equilibrium positions. Block pricing by utilities is an example of second-degree price discrimination.
Which of the following statements is true regarding competitive equilibrium for the labor market? The supply curve of labor to a competitive firm is horizontal because the firm can hire as many workers as it wants at the market wage. So it is actually beside the point. Our mission is to provide an online platform to help students to discuss anything and everything about Economics. A college student starts a part-time tutoring business. . An oligopolistic industry can be characterized by all of the following except many sellers.
The industry under monopolistic competition is characterized by excess capacity because entry occurs until zero profits are made, which implies that each firm is producing to the left of the minimum point of its average cost curve. Which of the following is not a reason why cartels fail? To sell one more unit of output, the firm must lower its price, meaning that the revenue received is less than that received for the previous unit marginal revenue received for unit 2 is less than that for unit 1. When the supply of labor used to produce a good sold in a competitive market increases, causing the wage of labor to produce that good to fall, for output to remain unchanged the labor demand curve must shift in and to the left. Monopoly power possessed by any one firm is less as the elasticity of supply by rival firms as a group increases. The Stackelberg model differs from the Cournot model in that the Stackelberg model assumes one firm learns the reaction curve of the other firm and acts as leader. Because a monopoly hires workers up to the point where their marginal revenue product equals the wage rate, the monopoly will pay less than marginal value product of labor. Thus, firms may require higher prices to justify expanding their outputs ….
Which of the following relationships between marginal revenue and price elasticity of demand is incorrect? When a monopoly is maximizing profits, which of the following conditions generally holds? The explanation provided below describes the supply curve. Total surplus is less in monopoly. Workers are paid their marginal value product. Product differentiation can be achieved through friendly service. Successful price discrimination requires prevention of resale because multiple prices for the good or service cannot persist otherwise. That is, if the price of goods and services is high, then sellers will produce a large number of goods and services. A similar logic applies for the economy as a whole.
Monopolistic competition is inefficient in that firms fail to produce at the lowest possible average cost. A novelist obtains a copyright for her new book. Long-run equilibrium in monopolistic competition is characterized by an output rate associated with a tangency between the demand curve and the average cost curve. With third-degree price discrimination and two markets with differing demand elasticities, price will converge in the two markets if resale is possible Imposing a per-unit tax on a perfectly price-discriminating monopolist will reduce its output. Because of the ability to extract excess profit from a market, monopolies are undesirable.
Which of the following supply curves of an input is likely to be the most elastic? In an oligopolistic industry where the dominant firm acts as price leader, the dominant firm faces a residual demand curve that determines its marginal revenue. There is no so supply curve of a price-maker. A rise fall in the prices of resources shifts the supply curve leftward rightward. Thus, there is no unique price-quantity relationship, since quantity supplied by a firm under monopoly is not determined by price but instead by marginal revenue, given the marginal cost curve. So we cannot locate any point on the supply curve.
Why do gas stations near airports often charge more for gasoline? Which of the following statements is true? A per-unit tax imposed on a monopolist will lead to an increase in deadweight efficiency loss. An expansion pathis the locus of is the locus of cost-minimizing points for a given set of input prices. Maybe he meant additional or increasing input such as labor and capital will bring diminishing return too many cooks in a fixed kitchen spoil the broth in production or decreasing marginal product not marginal revenue. Peak-load pricing is typically introduced when production costs vary in different time periods. Which of the following statements about a monopoly in long-run equilibrium is incorrect? A monopolistic competitor who is maximizing profits will choose quantity such that marginal revenue equals marginal cost.