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In monopolist competition profits well in excess of costs are unlikely because?
Wiki User
∙ 6y ago
established rivals and new firms would lure customers away with slightly different and/or cheaper products
Era Boyer
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Why a monopolist must lower its quantity relative to a competitive market to maximize its profits?
A monopolist has to lower its quantity relative to the competitive market to maximize profits because the monopolist is already in control of the biggest part of the market. This means that because they're already in control, to keep the market competitive they need to release the same amount of product as their competition.
Explain why a monopolist must lower its quantity relative to a competitive market to maximize its profits?
A monopolist must lower its quantity relative to a competitive market to maximize its profits because the monopolist already controls and owns the largest share of the market.
Effect of a monopolist's price increase?
If a monopolist raises his prices above marginal cost, he will increase his profits. This seems like a good thing for the monopolist. However, the down side is that it reduces the well-being of consumers. Most times, the harm to consumers is greater than the gain of the monopolist.
In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to?
marginal revenue
In the long-run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to?
marginal revenue
What is the profit maximizing decision a perfectly competitive firm makes in the short run and explain why this firm can make profits in the short run but not in the long run?
A perfectly competitive firm maximizes profit in the short run by producing the quantity where marginal cost equals marginal revenue. In the short run, firms can make profits due to price fluctuations and temporary market conditions, but in the long run, new firms can easily enter the market, increasing competition and driving down prices to the point where economic profits are reduced to zero.
Why do Firms trying to avoid competition?
Firms try to avoid competition so that they can set higher profits and earn greater profits.
Why aren't entrepreneurs likely to earn large profits from their businesses over many years?
Because of the recession, overhead, and competition.
Why would anyone want to enter a profitable industry knowing that profits would eventually be eliminated by competition?
It is not certain that anyone's profits will eventually be eliminated by competition; it is in the nature of competition that you have a chance of winning, as well as a chance of losing. And lots of people enjoy competition.
What do monopolist do to maximize profits?
by eliminating competition to control prices
2 Does the fact that a firm is a monopolist ensure that it will be able to earn positive economic profits Why or why not?
No. It depends on the monopolistic firm. If the firm is a monopolist because it has lowered its prices on products so low to drain out the competition and force the other firms to exit the market, it may not be profiting at all and it may be losing money instead. However, in the long run a monopolistic firm can be profitable because when all firms exit the market it has the ability to raise prices to pay for any loss it may have experienced by lowering prices in the earlier part of its monopolistic strategy. A firm that is a monopolist in a market may never see profitability. It all depends on the monopolist's ability to defend its product that it takes to market. Also, a firm isn't ever guaranteed positive economic profit. The demand might cease at any time and the firm might find itself in a never ending loss scenerio.
Why do companies practice price discrimination?
Price discrimination is based on the idea that each customer has his or her own maximum price he or she will pay for a good. If a monopolist sets the good's price at the highest maximum price of all the buyers in the market, the monopolist will only sell to the one customer willing to pay that much. If the monopolist sets a low price, the monopolist will gain a lot of customers, but the monopolist will lose the profits it could have made from the customers who bought at the low price but were willing to pay more. Price discrimination recognizes that groups of consumers are willing and able to pay different amounts for a good. (gradpoint)
