Question
Asked Nov 20, 2019
32 views

explain pure competition monopoly and monopolistic competition under.

A. Economic Profit

B. Normal Profit

C. Minimum Profit

D. Maximum Profit 

check_circle

Expert Answer

Step 1

Monopoly market is the market when there is only one seller or a buyer of a commodity whereas monopolistic market is an imperfect competition market with where products sold are differentiated from each other.

 

  1. a) ECONOMIC PROFITS: Economic profits refers to the difference between total revenue and the total costs of production of the firm.

 

In Monopoly market because there is a single seller, he has the right to decide the price of the commodity. Hence, he chooses the higher price and lesser quantity of the product he is selling. This allows him to extract all the consumer surplus. In this market to achieve equilibrium an maximize his profits the monopolist he equalizes his Marginal Revenue to marginal costs.

 

The economic profit earned by monopolist can be seen in the diagram:

 

In diagram we can see that economic profit is the shaded area PE*RS which is the difference between the average total cost and profit or the total revenue shown as the area under price line and the marginal cost.

 

In monopolist market similarly the economic profit is the difference between cost and total revenue and it is shown in diagram as the shaded area.

MC
ATC
Pice rad
D-AR
-Oang
MR
EcoNDMIC psoFITS UNDER
MoNepaty
MC
AC
AR
uat
MR.
E LONOMIC PROFI UNDER
MANIOpoLieTIC COPETITION
help_outline

Image Transcriptionclose

MC ATC Pice rad D-AR -Oang MR EcoNDMIC psoFITS UNDER MoNepaty MC AC AR uat MR. E LONOMIC PROFI UNDER MANIOpoLieTIC COPETITION

fullscreen
Step 2

Normal profits: Normal profits refers to the difference between the average cost and the average revenue.

 

In monopoly market, the normal profits can be seen in the diagram where MC Curve is below the AC curve and at equilibrium MR=MC and AC touches the same point ...

P
AC.
AR-t
Cuoubs
TMR
NORMAL PROFI1S UDER
MoNOpoLY
PRICES
c
ATC.
Pa.
QUANITY
NORMAL PROFITS UNDER
MONO POLICTIC COmpeTITION
help_outline

Image Transcriptionclose

P AC. AR-t Cuoubs TMR NORMAL PROFI1S UDER MoNOpoLY PRICES c ATC. Pa. QUANITY NORMAL PROFITS UNDER MONO POLICTIC COmpeTITION

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Economics

Related Economics Q&A

Find answers to questions asked by student like you

Show more Q&A add
question_answer

Q: Give examples of goods with high utility and high prices, andgoods with low utility and low prices.

A: If a person consumes a normal good, his marginal utility decreases on every additional good he consu...

question_answer

Q: Economics Question

A: The labor works (100-l) hours, where l is the leisure hour. Here he have two choices either work or ...

question_answer

Q: know how to plot graph and explain price discrimination

A: The price discrimination is the practice of charging different price from different consumers for th...

question_answer

Q: Hello, I would like some step-by-step demonstration (I am having a lot of problems to understand tha...

A: The policy taken by the US government to increase the disposable income of American consumers will g...

question_answer

Q: Which of the following best represents the pricing behavior of firms in an oligopolistic market?    ...

A: Oligopoly has a distinctive feature of having interdependence among firms. It means that the price o...

question_answer

Q: In 2008 the Fed reduced both the discount and federal fund rates dramatically.  But bank loan volume...

A: Loan demand is subject to repayment option. If the economic condition guarantees that the loan can b...

question_answer

Q: 10. Public policy toward monopolies Suppose that a government that is skeptical of efforts to regula...

A: Monopoly:A monopoly refers to the market situation where a single seller sells the commodity which h...

question_answer

Q: A 1996 bill reforming the federal government’s antipoverty programs limited many welfare recipients ...

A: A) With the reduction in the welfare of recipients to only two years of benefits their incentive to ...

question_answer

Q: 5. The role of brand names and advertising Which of the following statements about expenditures on a...

A: When a firm spends a large amount of money on advertising, advertising can be construed as a signal ...