The Monopolist And Profit Maximization Economics Essay

The Monopolist And Profit Maximization Economics EssayMonopoly is a single seller and m either buyers. There is no rest between unswerving and industry and monopoly form as imperfect market. Besides that, monopoly is the sole provider of goods and operate.2.1 Characteristics of MonopolyThere be some characteristics of monopoly market.One seller and w tout ensembleoping number of buyersThe one of monopoly characteristic is one seller and bighearted number of buyers is grown and the size of each firm is very small. The number of buyers also large and this firm thronenot influence the market equipment casualty. So basically, individual firm does not bother about the reactions of the firm. Besides that, adjusts its sale to earn maximum profits and the price given under perfect arguing. The demand of individual buyers relative to the total demand. And so small that cannot influence the price of the return by his individual action. crossroad has no lose substitutesThe second c haracteristics is, growth differentiation, on that point is harvest-festival argon close substitutes but not perfect substitutes. Its means, products be alike but not equal. For an example, Colgate toothpaste is slightly different from Darlie toothpaste. Otherwise, similarly dettol soap is different from life buoy soap. But if the buyers can find any substitutes for toothpaste and soap means, may be the differences is accredited or imaginary but its create attachments. Consumers prefer one product to another, under noncompetitive aspiration. Monopoly cannot exist if thither is a competition or any substitute product because consumers or buyers could not find any replacement for the product.Restriction on the entryway of new firm.The third characteristics of the monopoly are, firm under monopolistic are easy to entry and leave the industry. Barriers are not entry is natural or legal restriction that restricts the entry of new firms into the industry. Hence, a firm has legal agree everywhere other firms. There is restricting competition in the market.AdvertisingIn monopoly market, advertising is depends to the product sold. If the product is good and services means, the monopoly call for make advertisement to inform consumers on the goods. So that, its try to establish goods of its own products. By the advertising, consumers can know their selling costs. However, if the products are not luxury goods such as water service, electricity service, and local telephone service, then the seller no need to create any advertisement. This is because a component of the buyers know that where are the places and locations to get and purchase these fewer products.2.1.1 DiagramThe Monopolist and Profit MaximizationIn the diagram, the quantity of produced and price charged has own control for both of it. That also, ideal demand curve for goods and services produced. So that, it will facing a downward slopping demand curve in the diagram. Equivalently, a monopoly n eer operates in the inelastic portion of its demand curve.Monopolist Profit Maximizationhttp//i.investopedia.com/inv/articles/site/micro3.12.gifWhat happens if the monopolist later faces a demand curve such as D1? In that case, the monopolist cannot c over costs and will go out of business.2.1.2 Demand, Marginal Revenue, and Elasticityhttp//cyro.cs-territories.com/asa2_economics/unit4/images/monopolisticcompetitionlongrun1.pngIn the diagram, demand curve is elastic as at that place many firms. So that, on that point is lack of close substitutes. The profits shown as abnormal where the shaded area and competitor the short run.As shown in the graph above, a monopolist facing demand curve D0 will produce quantity Q0 and the price charged will be equal to P0.2.1.3 ConclusionAll in all, monopoly have four characteristics of structure. Besides that, monopoly is the sole provider of goods and services. The monopoly market is still solely by mutually beneficial exchange of firm exist and many.3.0 divergence between Perfect competition, monopolistic competition, oligopoly, and monopolyPerfect competition, monopolistic competition, oligopoly and monopoly have their own respectively features. Their characteristic of their four markets is not same. In monopoly, the market structure in which there is only one producer and seller for a product. Oligopoly is only few firms that make up an industry and select group of firms has control over the price. Monopoly and oligopoly has high barriers to entry. Then, monopoly structure is opposite for perfect competition. Perfect competition are has many buyers and sellers, many products that are similar in nature and there are many substitutes.3.1 Differentiate between perfect competition, monopolistic competition, oligopoly and monopoly3.1.1 Perfect competitionPerfect competition is a market is a possible market where competition is at its greatest in possible level. The products are homogeneous and seller can easily enter and ex it from their market.Number of seller and buyersPerfect competition is very large numbers of firms in the market. Perfect competition also existence of large number of buyers and sellers. There is no dominating firm and all firms are usually small and are price takers, because the individual sales volume is relatively small compared to market volume. The price does not change and there is no discernible change in the quantity exchanged in the market.Unrestricted to entry and existThe second characteristics of perfect competition is there are unrestricted on the entry and exist of both buyers and sellers. A firm can easily enter into perfect competition market and leave the market at any time, if that firm cannot continue the firm. The absence of such barriers does not affect the prices, and there is always a substitute for suppliers, who enters and leaves if, wants. If any losses keep the firm will exist the industry without any reason. This is important to understand the free ent ry and free exist is possible in the long-time firm.Homogeneous productThere another condition of perfect competition is homogeneous product that is a product offer for sale by seller. It must be goods offers for sale and perfect substitutes of one another seller. One firm cannot differentiate the same products sold in the industry because buyers can identify the difference in monetary value of colors, quality and packing. There is mean, even though the products are same in nature but there is difference in terms of quality. Seller cannot molest the price above the prevailing price or lower the price. Homogeneity of product has an important implication for the market if products of different seller. Besides that, buyers not maintenance who they buy from, as long as the price is same.Maximum profitsIn the perfect competition, profit maximization determine by the quantity of product they sell. The marginal cost by the product of a single unit of the product is equal to the marginal revenue. Total revenue and total cost advent are the profit maximization. When the cost is lowest, and then only can be maximum profit.3.1.2 Monopolistic competitionThe concept monopolistic competition is more living than perfect competition. Monopolistic competition market each firm has its own price policy. The most things from another thing feature of monopolistic competition are the products of various firms are not identified. But they are close substitutes for each others. In the case, monopolistic and perfect competition is characteristic by the existence of sellers. The firms do not produce perfect substitutes. Otherwise, each firm has a small percentage of the total monopolistic market and thus has limited control over market price. harvest differentiates.Under monopolistic competition, product differentiation may entail physical or qualities differences in the products by their selves. There output product are differentiated between which are relatively close substitute s for each other. So that, that product prices cannot be very much different from each other. Product differentiated by location, services, designs, and brand names. The firms in monopolistic competition will differentiated their products and make them more appealing to the customers in order to maximize their profits.3.1.3 OligopolyIn anoligopoly, there are only a few firms that make up an industry. This select group of firms has control over the price and, like a monopoly an oligopoly has high barriers to entry. Main characteristic of oligopoly is interdependence of firms in the industry. Sum more, in the oligopoly market, all firms can earn abnormal profits in the long run because, the entry of new firms are difficult. Oligopoly is not like monopolistic market, because if firms change the prices or output, it has noticed effects on the sales and profits of its competitors. low number of large firmApproaches from small number of large firm are each which is relatively large compar ed to the overall size of market. Under oligopoly, few firms control the overall industry and there is no specific number of firms that must control the market.Homogeneous of differentiated productUnder oligopoly, when a product sold that can be either a homogeneous or a differentiated product. For example, petroleum, steel and etc. and also, oligopoly focus on goods sold. Basically, people have different wants needs and thus enjoy variety. Such as, automobiles and computers.Barriers no entryBarriers no entry is similar to monopoly market. The oligopoly firms will restrict new entry into the market. In this industry, a few huge firms own most of the available iron ore, a necessary raw material for steel production. Once the new firms are out of the market, there large firms reduce the production will increase the price. In these cases, barriers to entry are low, and it also as small investment may be inevitable to enter the market structure.3.1.4 MonopolyMonopoly can be considered opposite of perfect competition. It is a market form in which there are only sellers. Even though, there are many factors to rise up monopoly market. There is only one supplier and the demand curve that individual firms face is the market demand curve. A monopoly firm is deemed to have considerable control over the price of its product. In the case a monopoly can also arise if a company owns the entire supply of a necessary material needed to produce a product.3.1.5 ConclusionCharacteristicPerfect CompetitionMonopolistic CompetitionOligopolyMonopolyNumber of firms really ManyManyFewOneType of ProductHomogeneousDifferentiatedHomogeneous / DifferentiatedOnly product of its kind(no close substitute)restraint of entryVery easyRelatively easyNot EasyImpossiblePrice Setting powerNil(Price taker)SomewhatLimited infinite(Price Maker)Non Price CompetitionNoneConsiderableConsiderable for a differentiated oligopolySomewhatProductive efficiencyHighly efficient slight EfficientLess EfficientIne fficientLong run profits00PositiveHighExamplesDoesnt Exist agriculture closeFast Food, retails stores, cosmeticsCars, Steel, soft drinks, cerealsSmall town newspaper, rural gas station4.0 Conclusion and recommendationsIn the whole assignments, I wise(p) about microeconomics subject ant it is a very important subject to whom taking business course. The subject teaches every student about business skills and helps to learn about business knowledge of economics.In first question, I know the characteristics of monopoly. I also learn the differentiated of monopoly in the markets. The second question is about the differentiate between perfect competition, monopolistic competition, monopoly and oligopoly markets. From this question, I learned about the four characteristics of the markets such as the four markets are not same all the times.In spite of this assignment, I thank to my lecturer and coordinator for turn tail us to do this introduction to business. I appreciate from this assign ment that I can know well about the business chapters.Appendix