One (pure), or dominant producer selling to an holy market, consequently firm = industry
No almost substitutes for the product or service
? Thus, elasticity of demand tends to be mall, near 0
? trusty is a price-MAKER, has full discretion over Q level AND the setting of its (and thus the markets) P… to maximize its profits (objective)
? P is limited, how electric potential inter-industry disputation
Blocked institution: new firms are prevented from locating into, or surviving in the LR, the industry, due to various strict barriers to entry:
? Legal, exclusive contracts, patents
? Very steep fixed (initial K investment) costs
Firm aims to max profits by producing up to Qm* that equates MC to MR
Monopoly firms faces down sloping (rather then horizontal) MR curve… because it faces the entire (downwardly sloping) MARKET D curve
Why is the MR< P for all moreover the showtime building block of output for a monopoly
? To sell additional units the firm non only has to lower P on the last unit, but on all previous units (unless it engages in price discrimination- charging different buyers different Ps)
Since MR< P for all but first unit of Q, the D and MR curves slope downward…
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Monopolistic competition (M.C): Hybrid of PC and monopoly markets (most common type in US)
Assumptionsfeatures of M.
C markets
? comparatively easy (but not free) entry because barriers to entry are low
? large number of firms in a give product group
ex: two or three dozen
Therefore, little opportunity for secret approval among firms, since they cannot know all other rivals prices, qualities, costs, etc
Key Form of rival: Product Differentiation
? Via promotionmarketingadvertising thus close but not perfect substitutes
? A firm can...If you motivation to get a full essay, order it on our website: Ordercustompaper.com
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