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Why is a monopolist’s marginal revenue always less than the price?
The marginal revenue curve for a monopolist always lies beneath the market demand curve. To understand why, think about increasing the quantity along the demand curve by one unit, so that y...
Illustrating monopoly profits
Illustrating Monopoly Profits
It is straightforward to calculate profits of given numbers for total revenue and total cost. However, the size of monopoly profits can also be illustrated grap...WHAT IS THE DIFFERENCE BETWEEN PERCEIVED DEMAND AND MARKET DEMAND?
The demand curve as perceived by a perfectly competitive firm is not the overall market demand curve for that product. However, the firm’s demand curve as perceived...
Demand Curves Perceived by a Perfectly Competitive Firm and by a Monopoly
Consider a monopoly firm, comfortably surrounded by barriers to entry so that it need not fear competition from other producers. How will this monopoly choose its profit-maximizing quantity...
How Monopolies Form: Barriers to Entry
Because of the lack of competition, monopolies tend to earn significant economic profits. These profits should attract vigorous competition as described in Perfect Competition, and yet, bec...
Efficiency in Perfectly Competitive Markets
When profit-maximizing firms in perfectly competitive markets combine with utility-maximizing consumers, something remarkable happens: the resulting quantities of outputs of goods and servi...
Entry and Exit Decisions in the Long Run
The line between the short run and the long run cannot be defined precisely with a stopwatch, or even with a calendar. It varies according to the specific business. The distinction between ...
SHORT-RUN OUTCOMES FOR PERFECTLY COMPETITIVE FIRMS