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What is monopolistic equilibrium?

What is monopolistic equilibrium?

Short-run equilibrium of the firm under monopolistic competition. The firm maximizes its profits and produces a quantity where the firm’s marginal revenue (MR) is equal to its marginal cost (MC). The firm is able to collect a price based on the average revenue (AR) curve.

What are the necessary and sufficient condition for monopoly equilibrium?

“Equilibrium for the firm under perfect competition can only occur when the marginal cost of the firm is rising at or near equilibrium output.” Equilibrium under monopoly can occur whenever marginal costs are rising, falling a constant.

How does a monopolist attain equilibrium under different cost conditions in the long run?

Because of the fulfilment of FOC and SOC for equilibrium, the monopolist earns supernormal profit to the tune of ABDP. Under constant cost condition, MC curve becomes horizontal and coincides with the AC curve. He will attain equilibrium even if MC is falling or constant.

What are the conditions of equilibrium under monopolistic competition?

The short-run equilibrium of a monopolistic competitive organization is the same as that of an organization under monopoly. In the short run, an organization under monopolistic competition attains its equilibrium where marginal revenue equals marginal cost and sets its price according to its demand curve.

What is Cartel example?

A cartel is defined as a group of firms that gets together to make output and price decisions. The organization of petroleum‐exporting countries (OPEC) is perhaps the best‐known example of an international cartel; OPEC members meet regularly to decide how much oil each member of the cartel will be allowed to produce.

What is equilibrium price in a monopoly?

If the industry is a monopoly, then the equilibrium price and quantity is found by equating the marginal revenue curve for the monopolist with the marginal cost curve for the monopolist. The MR curve is MR = 1000 – 2Q while the MC curve is the supply curve. Thus, 1000 – 2Q = Q or Q = 333.3.

What are the conditions of equilibrium under monopoly?

The conditions for Equilibrium in Monopoly are the same as those under perfect competition. The marginal cost (MC) is equal to the marginal revenue (MR) and the MC curve cuts the MR curve from below.

Is MC MR a sufficient condition for equilibrium of monopoly Why?

The condition that for a firm to be in equilibrium marginal cost must equal marginal revenue is no doubt a necessary condition, but not a sufficient condition of equilibrium. For attaining equilibrium, a second condition must also be satisfied. This is that MC must cut the MR from below at the point of equilibrium.

What are the conditions for monopoly?

The following conditions for the existence of a monopoly are analyzed: the control of a resource or input, increasing returns to scale, technological superiority, and government-created barriers. A monopoly is an industry controlled by the only producer of a good that has no close substitutes.

What is the long run equilibrium condition for a perfectly competitive firm?

The long-run equilibrium of a perfectly competitive market occurs when marginal revenue equals marginal costs, which is also equal to average total costs.

What are the equilibrium conditions of the perfectly competitive market?

Equilibrium in perfect competition is the point where market demands will be equal to market supply. A firm’s price will be determined at this point. In the short run, equilibrium will be affected by demand. In the long run, both demand and supply of a product will affect the equilibrium in perfect competition.

What are the conditions for equilibrium in monopoly?

The conditions for Equilibrium in Monopoly are the same as those under perfect competition. The marginal cost (MC) is equal to the marginal revenue (MR) and the MC curve cuts the MR curve from below.

Which is a crucial condition for the maximization of the monopolists profit?

The crucial condition for the maximization of the monopolist’s profit is the equality of his MC and the MR, provided that the MC cuts the MR from below. We may now re-examine the statement that there is no unique supply curve for the monopolist derived from his MC.

Is the MC curve satisfied in a monopoly?

In fact, the sufficient condition of profit-maximisation (i.e., the MC curve has to intersect the MR curve from below and not from above) can be satisfied in monopoly under alternative cost conditions (i.e., in all the three cases mentioned above).

How is the price determined by a monopolist?

If the price determined by the monopolist in more than AC, he will get super normal profits. The monopolist will produce up to the level where MC=MR. This limit will indicate equilibrium output. In Figure 3 output is measured on X-axis and price on Y-axis.