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.
perfectly competitive industry become a monopoly, what changes
Explain how monopoly causes an inefficient allocation of resources when the competitive firm does not even when both seek to maximize profit
in a perfectly competitive industry
monopoly
the economy Major of those four are the natural monopoly. geographic monopoly, govrnement monopoly. technological monopoly.
perfectly competitive industry become a monopoly, what changes
perfectly competitive industry become a monopoly, what changes
Explain how monopoly causes an inefficient allocation of resources when the competitive firm does not even when both seek to maximize profit
in a perfectly competitive industry
monopoly
the economy Major of those four are the natural monopoly. geographic monopoly, govrnement monopoly. technological monopoly.
A perfect competitive market and pure monopoly market both have to follow the "law of demand".
It is assumed that they are producing on the lowest point of their Average Total Cost curves, therefore producing the maximum possible output from available inputs and so productively efficient. They are also allocatively efficient because Price is equal to Marginal Cost.
The difference between a monopoly market and a perfectly competitive market is that in a perfectly competitive market there are many sellers and buyers, the traded goods are homogeneous goods or the same goods and sellers are not free to set prices. whereas, a monopoly market is a market that has only one seller, so buyers have no other choice and sellers have a large influence on price changes.
Monopoly is efficient because it promotes growth in market sectors by engaging products in a competitive environment. That's what a monopoly does NOT do. A monopoly (single supplier to a marketplace) can be either efficient or inefficient. An efficient monopoly is one where, free from competitive pressures, the supplier spends all its time making more, higher quality and better costing products. That's not what usually happens. An INefficient monopoly is one where the monopolist gets fat and happy, secure in his knowledge anyone who uses the product he sells has to get it from him, and curtails innovation (since everyone's buying the stuff anyway, why bother?), cheapens the product he's selling and raises the price beyond all justification.
In Monopoly, there is no market power as the monopoly firm is the only supplier and holds pricing power. However in a perfect competitive market, prices are set by interaction of supply and demand. This is why monopoly markets are undesirable relative to perfect competitive market.
Anti-trust laws!