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Why does a monopoly produce less and charge a higher price compared to a competitive market?
Wiki User
∙ 13y ago
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.
Wiki User
∙ 13y ago
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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 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.
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 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
Why a monopoly can lead to inefficient outcomes?
There are various reasons why monopoly leads to an inefficient outcome. Some of the reasons are as follows: * It produces less output that what a competitive market would and charge higher price which ultimately leads to a decline in consumer surplus and a deadweight loss. * Monopoly charges a price above its marginal cost, i.e. P > MC, and this results in an allocative inefficiency * A monopoly doesn't produces at the lowest point of the average cost curve (AC) and hence it leads to production inefficiency. * Monopoly has less incentive to cut cost as it doesn't face competition. This is often termed as X-inefficiency. * A monopoly makes supernormal profit (economic profit), i.e. Q * (AR - AC), leading to an unequal distribution of income. * Monopoly produces less than perfect competition and hence creates unemployment of resources. * By producing less in order to charge higher price, monopoly creates an artificial scarcity. The inefficiency associated with a creation of artificial scarcity is called the Deadweight Loss. (Written by Manish Regmi )
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 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.
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.
Do electrons have a negetive charge?
Yes! they are Electrons produce negative charge, and protons produce positive charge, while neutrons produce no charge at all.
When the object is charged by contact what kind of charge does the object have compared with that on the object giving the charged?
When an object is charged by contact, the object getting the charge has the same charge compared with that of the object giving the charge. so if the object giving the charge has a positive charge, so does the object getting the charge
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
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.
What is the charge of alphaparticle as compared to proton?
The charge of an alpha particle is twice that of a proton.
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.
Translate prepositional phrase in the sentence they can produce in charge of 600 Volts?
Volts
What is the electrical charge in the proton?
Protons produce a positive charge.
