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Why does a monopoly produce less and charge a higher price compared to a competitive market?
According to the cost theory, the profit maximization point happens when marginal revenue crosses with marginal costs. This is due to the fact that al super profits (that exceeds the cost) are harnessed until this point.
However, this point where MR=MC does not correspond to the lowest point in the average cost curve therefore resulting in a higher price for a consumer (and welfare loss)
In addition, due to the under exploitation of the economies of scale and decrease in revenue, the firm has no incentive to produce further goods in which would reduce its average costs and thus price for the consumers.
Please refer to a cost theory graph in order to understand the above gibberish.
What else can I help you with?
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.
What is the relationship between producer surplus and a monopoly graph?
In a monopoly graph, producer surplus is the difference between the price the producer receives for a good or service and the cost of producing it. In a monopoly, the producer has more control over pricing and can charge higher prices, leading to a larger producer surplus compared to a competitive market.
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.
How can one calculate the deadweight loss caused by a monopoly?
To calculate the deadweight loss caused by a monopoly, you can use the formula: (1/2) x (monopoly price - competitive price) x (monopoly quantity - competitive quantity). This formula helps measure the inefficiency and economic loss resulting from a monopoly's ability to restrict output and charge higher prices than in a competitive market.
Why does a monopoly result in a deadweight loss?
A monopoly results in a deadweight loss because it restricts competition, leading to higher prices and lower quantity of goods produced than in a competitive market. This inefficiency occurs because the monopoly can charge higher prices without fear of losing customers to competitors, reducing overall economic welfare.
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.
What is the relationship between producer surplus and a monopoly graph?
In a monopoly graph, producer surplus is the difference between the price the producer receives for a good or service and the cost of producing it. In a monopoly, the producer has more control over pricing and can charge higher prices, leading to a larger producer surplus compared to a competitive market.
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.
How can one calculate the deadweight loss caused by a monopoly?
To calculate the deadweight loss caused by a monopoly, you can use the formula: (1/2) x (monopoly price - competitive price) x (monopoly quantity - competitive quantity). This formula helps measure the inefficiency and economic loss resulting from a monopoly's ability to restrict output and charge higher prices than in a competitive market.
Why does a monopoly result in a deadweight loss?
A monopoly results in a deadweight loss because it restricts competition, leading to higher prices and lower quantity of goods produced than in a competitive market. This inefficiency occurs because the monopoly can charge higher prices without fear of losing customers to competitors, reducing overall economic welfare.
How does the consumer surplus in a monopoly compare to that in perfect competition?
In a monopoly, consumer surplus is typically lower compared to perfect competition. This is because monopolies have more control over prices and can charge higher prices, reducing the benefit consumers receive from purchasing goods or services.
A cartel differs from a monopoly in that?
a cartel is a group that agrees to charge monopoly price and quantity, splitting quantity amongst themselves. so a monopoly is one company and a cartel is a group. Profits are lower for cartel members because they only produce a total quantity that is equal to a monopolists production. novanet-businesses making the same product agree to limit production
What charge does an exces of electrons produce?
An excess of electrons would produce a negative (-) charge since these particles are negative. If you imagine a scale with negative and positive weights, more negative weights would make the scales tip towards the negative end.
What is meant by monopoly?
if you buy out all your competition you have a monopoly. then you can charge whatever you want, because people don't have aby choice where to but. kinda like Microsoft or wal mart
How much is the Luxury Tax in Monopoly?
The Luxury Tax in Monopoly is $75. It is found between Park Place and Boardwalk.The U.S. edition of Monopoly raised it's Luxury tax to $100. Monopoly is not the only place you can find a Luxury tax. Many high end hotels charge them.
How does the game of Monopoly involve players buying property from each other to establish a monopoly?
In the game of Monopoly, players buy properties from each other to establish a monopoly by acquiring all properties of the same color group. This allows them to charge higher rent and potentially bankrupt their opponents.
Is the game monopoly a game?
A "monopoly" is the control of a commodity or service by one group (usually a small number of companies) so that they control the available supply - they can profit because they can charge whatever prices they want. The board game of Monopoly applies this on a limited basis by allowing property owners to charge much larger rents when they have control of an area of the board (the colored property groups). By developing these even further with houses and hotels, they can command ever larger fees from other players who land on their properties. Property groups where monopolies are not formed can only charge comparative small rents and are thus at a competitive disadvantage.
