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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. The company still produces where marginal cost and marginal revenue are equal; however, the demand curve (MR and AR) has shifted as other companies entered the market ...
2. This model dismisses the issue of interdependence when a firm sets its price. The firm will act as if it were a monopoly regarding the price it sets, not considering the potential responses from its competitors. The justification is that there are numerous firms in the market, so each receives only scant attention from the others.
Elasticity of demand: In a complete monopolistic market, the demand curve for the product is the market demand curve. There is only one firm within the industry. The monopolist is the sole seller, and its demand is the demand of the entire market. A monopolist is the price setter, but it is also limited by the law of market demand.
In addition, monopoly price will prevent new business from entering the market and restrict innovation. A monopoly would not like to invest more on research and development or innovation due to it already has a captive market. Then the lack of innovation may block market competition and limit the industry’s growth potential in long run.
The total surplus of perfect competition market is the highest. And the total surplus of imperfect competition market is lower. In the monopoly market, if the monopoly firm can adopt first-level price discrimination, the consumer surplus is zero and the monopoly firm obtains all the benefits in the market. [15]
Suppose Firm A acts as a monopolist. The profit-maximizing monopoly price charged by Firm A is then: = + Since Firm B will never sell below its marginal cost, as long as , Firm B will not enter the market when Firm A charges . That is, the market for good X is an effective monopoly if:
[1] [4] [3] [6] The monopolist can either have a target level of output that will ensure the monopoly price as the given consumer demand in the industry's market reacts to the fixed and limited market supply, or it can set a fixed monopoly price at the onset and adjust output until it can ensure no excess inventories occur at the final output ...
Excessive competition is a competition that supply is excessive to demand chronically, and it harm the producer on the interest. [66] Excessive competition is also caused when supply of goods or services which should be sold immediately is greater than demand. So on labor market, the labor will be left always into the excessive competition. [67]