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Does marginal surplus exist when consumers buy more products than socially optimal?
Wiki User
∙ 15y ago
No
Wiki User
∙ 15y ago
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If you have Marginal Cost and Marginal Damages how do you find the optimal level of output?
The optimal level of output is where marginal costs = marginal damages.
How do you achieve allocative efficiency?
Allocative efficiency is an output level where the price equals the marginal cost of production. This is because the price that consumers are willing to pay is equivalent to the marginal utility that they get. Therefore the optimal distribution is achieved when the marginal utility of the good equals the marginal cost.
How to use the concept of price elasticity of demand to maximize revenue?
Price elasticity of demand is a way to determine marginal revenue. Optimal revenue and, more importantly, optimal profit will occur to the point when marginal revenue = marginal cost, or the price elasticity of demand < 1.
In a monopoly why is the marginal revenue curve always below the demand curve?
because price and output are related by the demand function in a monopoly. it is the same thing to choose optimal price or to choose the optimal output. even though the monopolist is assumed to set price and consumers choose quantity as a function of price, we can think of the monopolist as choosing the optimal quantity it wants consumers to buy and then setting the corresponding price. OR in simpler terms Because AR (demand) is downward sloping - (see equi-marginal rule or Law of Equi-Marginal Utility). To sell one more unit of output, the firm must lower its price, meaning that the revenue received is less than that received for the previous unit (marginal revenue received for unit 2 is less than that for unit 1). Therefor the marginal revenue will be less than the average revenue. Unit 1 sold for $5 Marginal revenue=$5 Average Revenue=$5 Unit 2 sold for $4 Marginal revenue=$4 Average Revenue=$4.50 ($5+$4/2)
If marginal cost is 0 how would you find optimal price?
if mc=0, its a natural monopoly.
If you have Marginal Cost and Marginal Damages how do you find the optimal level of output?
The optimal level of output is where marginal costs = marginal damages.
How do you achieve allocative efficiency?
Allocative efficiency is an output level where the price equals the marginal cost of production. This is because the price that consumers are willing to pay is equivalent to the marginal utility that they get. Therefore the optimal distribution is achieved when the marginal utility of the good equals the marginal cost.
How do you determine the optimal level of advertising?
the optimal level of advertising expenditure for the firm is determined where the marginal revenue increase in costs of advertising are equal to the marginal increase in revenue
What is the optimal level of pollution?
when marginal benefit is equal to marginal cost To be more specific: When the marginal damage cost of polluting is equal to the marginal abatement cost of polluting (or the marginal benefit of polluting, which is equivalent to the MAC)
How to use the concept of price elasticity of demand to maximize revenue?
Price elasticity of demand is a way to determine marginal revenue. Optimal revenue and, more importantly, optimal profit will occur to the point when marginal revenue = marginal cost, or the price elasticity of demand < 1.
In a monopoly why is the marginal revenue curve always below the demand curve?
because price and output are related by the demand function in a monopoly. it is the same thing to choose optimal price or to choose the optimal output. even though the monopolist is assumed to set price and consumers choose quantity as a function of price, we can think of the monopolist as choosing the optimal quantity it wants consumers to buy and then setting the corresponding price. OR in simpler terms Because AR (demand) is downward sloping - (see equi-marginal rule or Law of Equi-Marginal Utility). To sell one more unit of output, the firm must lower its price, meaning that the revenue received is less than that received for the previous unit (marginal revenue received for unit 2 is less than that for unit 1). Therefor the marginal revenue will be less than the average revenue. Unit 1 sold for $5 Marginal revenue=$5 Average Revenue=$5 Unit 2 sold for $4 Marginal revenue=$4 Average Revenue=$4.50 ($5+$4/2)
How does marginal revenue and marginal utility relate to capital?
Marginal revenue/margina utility return from capital represents the benefit of capital. When determining the optimal amount of capital, we must take into account the point when marginal benefit = marginal cost. This optimises profit/utility.
If marginal cost is 0 how would you find optimal price?
if mc=0, its a natural monopoly.
What does socially optimal means in economics?
The socially optimal point of production for a firm in a monopolisticly-competitive industry, or in a monopoly, or in an oligopoly is the point where the average cost curve (ATC) intersects the demand curve (or average revenue curve). At this point, the total profit of the monopoly is zero, so the point is said to be "socially optimal" as the firm does not retain any profits from its operation, and all the benefits of running the business are passed on to society.
How a monopoly firm will not achieve allocative efficiency?
They produce at a different point than a competitive firm, a monopoly produces at a point where marginal revenue= marginal cost, where a competitive firm equates price to marginal cost. The marginal cost curve is lower than the demand curve, but the monopoly charges the price at the demand curve, which is a higher price and a lower quantity than a competitive market would produce.
In which market structures do firms produce at the socially optimal level?
Perfectly competitive
Perfectly competitive firm in long run equilibrium?
what about them? profits are 0 price=marginal cost all costs are variable optimal allocation of inputs is where marginal rate of technical substitution is equal to the price ratio of the inputs.
