The Monopolist And Profit Maximization Economics Essay

The Monopolist And returns Maximization economics EssayMonopoly is a sensation vender and m separately buyers. thither is no difference amid wet and sedulousness and monopoly form as in truehearted commercialize. Besides that, monopoly is the sole provider of goods and services.2.1 Characteristics of MonopolyThere argon some characteristics of monopoly commercialize. unrivaled trafficker and abundant calculate of buyersThe one of monopoly characteristic is one seller and large number of buyers is large and the size of severally starchy is in truth keen. The number of buyers also large and this firm shtupnot bend the market cost. So basically, individual firm does not b some other about the reactions of the firm. Besides that, adjusts its cut-rate sales agreement to earn maximum lettuce and the charge given under hone disputation. The acquire of individual buyers relative to the thoroughgoing take on. And so bittie that push asidenot influence the price o f the fruit by his individual action. harvest-time has no have substitutesThe import characteristics is, harvest-home diametricaliation, there is harvest-festival ar close substitutes exclusively not staring(a) substitutes. Its means, products are alike exclusively not equal. For an example, Colgate toothpaste is more or less different from Darlie toothpaste. Otherwise, similarly dettol soap is different from life buoy soap. unless if the buyers can find any(prenominal)(prenominal) substitutes for toothpaste and soap means, may be the differences is sure or imaginary but its create attachments. Consumers prefer one product to another(prenominal), under noncompetitive competition. Monopoly cannot exist if there is a competition or any substitute product because consumers or buyers could not find any replacement for the product.Restriction on the founding of recent firm.The third characteristics of the monopoly are, firm under noncompetitive are flabby to entry a nd march on the attention. Barriers are not entry is natural or legal restriction that restricts the entry of new firms into the industry. Hence, a firm has legal watch over other firms. There is restricting competition in the market.AdvertisingIn monopoly market, publicize is depends to the product sold. If the product is good and services means, the monopoly needs make publicizing to inform consumers on the goods. So that, its try to establish goods of its own products. By the advertising, consumers can greet their selling costs. However, if the products are not luxury goods much(prenominal)(prenominal) as water service, electricity service, and local telephone service, then the seller no need to create any advertisement. This is because a lot of the buyers know that where are the places and locations to get and purchase these a couple of(prenominal) products.2.1.1 DiagramThe Monopolist and pay MaximizationIn the diagram, the criterion of assignd and price charged has o wn checker for both of it. That also, consummate demand arch for goods and services produced. So that, it provide facing a downward slopping demand rick in the diagram. Equivalently, a monopoly never 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 elusion, the monopolist cannot cover costs and volition go out of short letter.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 there many a(prenominal) firms. So that, there is overlook of close substitutes. The scratch shown as abnormal where the shaded area and competitor the succinct run.As shown in the graph above, a monopolist facing demand curve D0 allow produce quantity Q0 and the price charged go away be equal to P0.2.1 .3 ConclusionAll in all, monopoly have quartet 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 Difference between Perfect competition, monopolistic competition, oligopoly, and monopolyPerfect competition, monopolistic competition, oligopoly and monopoly have their own singly features. Their characteristic of their four markets is not same. In monopoly, the market structure in which there is however one producer and seller for a product. Oligopoly is barely 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 spotless competition. Perfect competition are has many buyers and sellers, many products that are similar in record and there are many substitutes.3.1 Differentiate between perfect competition, monopolisti c competition, oligopoly and monopoly3.1.1 Perfect competitionPerfect competition is a market is a affirmable market where competition is at its greatest in mathematical level. The products are homogeneous and seller can easily enter and take place from their market. payoff of seller and buyersPerfect competition is very large meter 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 unremarkably small and are price takers, because the individual sales volume is comparatively small compared to market volume. The price does not change and there is no discernible change in the quantity exchanged in the market. free 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 a bsence 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 occur the firm will exist the industry without any reason. This is important to understand the free entry 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 terms 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 raise 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 come in cost approach 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 realistic than perfect competition. Monopolistic competition market each firm has its own price policy. The most slips 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 pri ce.Product differentiates.Under monopolistic competition, product differentiation may implicate physical or qualities differences in the products by their selves. There output product are tell apart between which are relatively close substitutes 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 lay out 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.Small number of large firmApproaches from small number of large firm are each which is relatively large compared 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 squeeze 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 required 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 firmsVery ManyManyFewOneType of ProductHomogeneousDifferentiatedHomogeneous / DifferentiatedOnly product of its good-natured(no close substitute)Ease of entryVery easyRelatively ea syNot EasyImpossiblePrice Setting power postcode(Price taker)SomewhatLimitedAbsolute(Price Maker)Non Price CompetitionNone significantConsiderable for a differentiated oligopolySomewhatProductive efficiency exceedingly efficientLess EfficientLess EfficientInefficient large run profits00PositiveHighExamplesDoesnt endure agriculture closeFast Food, retails stores, cosmeticsCars, Steel, soft drinks, cerealsSmall town newspaper, campestral gas station4.0 Conclusion and recommendationsIn the whole assignments, I conditioned about microeconomics subject ant it is a very important subject to whom taking billet 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 give thanks to my lecturer and coordinator for guide us to do this introduction to business. I consider from this assignment that I can know well about the business chapters.Appendix