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The difference between the company's average revenue and average cost, multiplied by the quantity sold (Qs), gives the total profit. A short-run monopolistic competition equilibrium graph has the same properties of a monopoly equilibrium graph. Long-run equilibrium of the firm under monopolistic competition.
[2] [3] Since a competitive market has many competing firms, a customer can buy widgets from any of the competing firms. [1] [4] [2] [5] Because of this tight competition, competing firms in a market each have their own horizontal demand curve that is fixed at a single price established by market equilibrium for the entire industry as a whole.
Unlike perfect competition where firms can freely enter and exit the market, it is not the case for monopolistic competition. For a monopoly to exist, there must be high barriers to entry for new firms. Barriers to entry must be strong enough to discourage potential competitors from entering.
Average-cost pricing does also have some disadvantages. By setting price equal to the intersection of the demand curve and the average total cost curve, the firm's output is allocatively inefficient as the price is less than the marginal cost (which is the output quantity for a perfectly competitive and allocatively efficient market).
"P firm" is the price charged by the firm itself. "P comp" is the average price charged by its competitors. The intuition of this model is: If all firms charge the same price, their respective market share will be 1/n. Firms charging more get less, and firms charging less get more.
If you’re stuck on today’s Wordle answer, we’re here to help—but beware of spoilers for Wordle 1271 ahead. Let's start with a few hints.
If the firm is a monopolist, the marginal revenue curve would have a negative slope as shown in the next graph, because it would be based on the downward-sloping market demand curve. The optimal output, shown in the graph as , is the level of output at which
(Reuters) -Wall Street was set to open higher on Monday, with the main U.S. stock indexes poised to recoup some losses following a turbulent trading week, ahead of key corporate earnings and the ...