mims vs starbucks
Economics 1020 Features Of Monopoly
At the extreme of pure competition is monopoly. Monopolies
(along with oligopolies, and monopolistic competitors) are known as price searching or non-competitive firms. They have the ability to set their selling price by adjusting their supply. Notice: No firm nor industry is able to change the demand for its product. Only buyers control demand!
Characteristics Of Monopolies.
1. A single seller or producer of the item. Often, there are no good substitutes for the item. So consumers must buy it!
2. Barriers to enter the industry. These obstacles may be patents and other legal restrictions, and economies of scale.
3. Have monopoly power. This means, the firm can set its selling price. Notice: Oligopolies and monopolistic competitors have monopoly power. The monopolist simply has more of it, followed by the oligopolist.
4. The demand curve (which is the demand curve of the industry) is negatively sloped or downward sloping. The firm operates only in the top half of this curve where its marginal revenues MR are greater than zero.
5. The marginal revenue MR curve is below the demand curve D and is twice as steep as it. In fact, when MR is zero, the firm is in the middle of its demand curve D. Look at the table below. Notice how the difference between the price and MR is getting as more is produced. Here is the reason: To sell one more unit (to get MR) the firm has to lower its price on all the units it is selling.
6. All inputs are paid wages that are not equal to the value of their marginal product. That is workers receive wages that are lower than their VMP. Entrepreneurs receive wages that are higher than their VMP.
7. Good-will advertising to enhance the image of the company.
8. Profit Maximizing Rule or loss minimizing rule(for all price searchers). Make the amount for which marginal revenues equal
At the extreme of pure competition is monopoly. Monopolies
(along with oligopolies, and monopolistic competitors) are known as price searching or non-competitive firms. They have the ability to set their selling price by adjusting their supply. Notice: No firm nor industry is able to change the demand for its product. Only buyers control demand!
Characteristics Of Monopolies.
1. A single seller or producer of the item. Often, there are no good substitutes for the item. So consumers must buy it!
2. Barriers to enter the industry. These obstacles may be patents and other legal restrictions, and economies of scale.
3. Have monopoly power. This means, the firm can set its selling price. Notice: Oligopolies and monopolistic competitors have monopoly power. The monopolist simply has more of it, followed by the oligopolist.
4. The demand curve (which is the demand curve of the industry) is negatively sloped or downward sloping. The firm operates only in the top half of this curve where its marginal revenues MR are greater than zero.
5. The marginal revenue MR curve is below the demand curve D and is twice as steep as it. In fact, when MR is zero, the firm is in the middle of its demand curve D. Look at the table below. Notice how the difference between the price and MR is getting as more is produced. Here is the reason: To sell one more unit (to get MR) the firm has to lower its price on all the units it is selling.
6. All inputs are paid wages that are not equal to the value of their marginal product. That is workers receive wages that are lower than their VMP. Entrepreneurs receive wages that are higher than their VMP.
7. Good-will advertising to enhance the image of the company.
8. Profit Maximizing Rule or loss minimizing rule(for all price searchers). Make the amount for which marginal revenues equal