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How Market can work perfectly with equally in marginal cost and marginal cost benefit?
Wiki User
∙ 11y ago
ok firstly, you start by finding a gun. then kill all the other markets competitors. now you own the markets :)
Wiki User
∙ 11y ago
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How do you find selling price?
In a perfectly competitive market, it is equal to marginal cost, it is also the point of equilibrium.
Why marginal cost go decrease in initial phase under perfect competition?
Since, in a perfectly competitive market, prices are fought down to Price = Marginal Cost, the only way to make a strict economic profit is to lower marginal cost.
Is it possible for perfect competitive market to be inefficient?
It is possible for perfectly competitive markets to be inefficient when externalities are present. Externalities arise when an economic activity has an unintended impact on other economic agents and/or the market. This results in there being a socially optimal level of production that does not coincide with the privately determined equilibirum level of production derived from the supply and demand curves (which, respectively, represent the marginal private costs and marginal private benefits to producers and consumers). With respect to the efficiency of markets, positive externalities result in too little of the good in question being produced. In this case, the market equilibrium is lower than desired (the marginal social benefit curve lies above the marginal private benefit [demand] curve). In this case, the efficient market outcome would occur where the marginal social beneift curve interests the marginal private cost (supply) curve. When negative externalities occur, too much of the good in question is being produced. This results in the supply curve, which represents the marginal private costs of production, lying below the marginal social cost curve because the private cost curve fails to take into account the costs of production incurred by all of society. In this case, the efficient market outcome would occur where the marginal social cost curve coincides with the private marginal benefit (demand) curve.
What are the advantages and disadvantages of the government intervention in the free market?
One primary advantage of government intervention is to market failure just like when the marginal social cost is greater than the marginal social benefit or vise versa. One disadvantage is that the market may become dependent on subsidies if they are used to correct failure.
What is another name for a Marginal Market?
any free market
Why monopoly is allocatively inefficient relative to perfectly competitive market?
A monopoly produces at a point where marginal revenue equals marginal cost, they don't charge this price, but charge a higher price that corresponds with the demand they face. Therefore they produce less and charge more than a competitive firm that equates the price to marginal cost.
How will equilibirium be determined under discriminating monopoly with two markets?
It will be so because it will not achieve a social equilbrium of marginal benefit (demand) = marginal cost (supply). It will instead set a private profit equilibrium where private benefit (marginal revenue) = marginal cost and thus create a deadweight inefficiency equal to the difference in total social surplus between the regions.
If marginal revenue is less than average revenue will the demand curve be downward sloping?
This question reflects a fundamental misunderstanding of supply and demand. Marginal revenue and average revenue are related to a firm's cost function, and are thus connected to SUPPLY. They have nothing to do with a demand curve in classical economics, which is the marginal benefit to the CONSUMER of being in the market.
How do you find a monopolist's profit maximising...?
The monopolist's profit maximizing level of output is found by equating its marginal revenue with its marginal cost, which is the same profit maximizing condition that a perfectly competitive firm uses to determine its equilibrium level of output. Indeed, the condition that marginal revenue equal marginal cost is used to determine the profit maximizing level of output of every firm, regardless of the market structure in which the firm is operating.
List similarities between perfectly competitive and monopoly?
There are not many similarities between a perfectly competitive market and a monopoly. In a perfectly competitive market there are no barriers to exit and enter the market. If there are excess profits being made in this market other firms will enter the market to try and get a share of those profits. Since there are many markets with a equal piece of the market share each firms production decision will have little or no effect on the market. Because of the firm's relative size to the market it must be a price taker. If the firm tries to increase the price in a perfectly competitive market then no consumers will buy from that firm because there are numerous other firms that sell that the same good. The price maximization condition of the competitive market is marginal cost equals marginal revenue. In a competitive market marginal revenue is the same as demand because the firm can sell as many as it wants in a competitive market. In a monopoly, the firm is the price setter. It is the only firm that is supplying so it has price setting power. The price maximization condition of a monopoly is marginal cost equals marginal revenue but with a caveat. Marginal revenue does not equal the demand curve, but is derived from the demand curve. Since the firm is the only supplier, assuming it cannot practice price discrimination, it must lower its price in order to gain more customers so the people who would pay a high price are paying a lower price because the firm wants to sell its products to more customers.
Explain why the P equals MC rule is the same as the MR equals MC rule for perfectly competitive firms?
Perfectly competitive firms are price takers. This means that they can sell as much or as little as they want, but only at the going market price. When this happens, the market price is the same as their marginal revenue. Thus, P=MC is the same as P=MR.
If the market price for a chair is 24 and the marginal cost for the chair is 7 the marginal revenue from the chair would be .?
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