Advantages Of Profit Maximization Under Perfect Competition

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Profit Maximization under Perfect Competition
Under Perfect competition we describe it by the presence of many companies offering comparative products and services to many customers who have know the marke very well. Using this model, we can say that no one firm can influence the price of goods and services, as well as the levels of outputs used to maximize gains . In maximizing profit under perfect competition, firms calculate the best standard of the production when the marginal revenue and the market price equal the marginal cost (Makowski & Ostroy, 2001). The businesses in this competition can increase gains by increasing outputs until the marginal revenue and the market price exceeds the marginal costs.
For short-run profit
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In the short run, an increase in price will increase the production, leading to a higher economic gains.An increase in their profits can only be achieved when total revenue exceeds total costs (Makowski & Ostroy, 2001). Perfect competition has greater benefits for consumers than producers since the long-run advantages of perfect competition is none. Consumers cannot suffer or complain from price increase or decrease in supply. Their complete knowledge of the market is a great …show more content…
A firm in a monopoly competition can sell more products only when it lowers the costs. Demand increases when the prices decreases. However, the marginal revenue will always be less than the price in a monopoly market (Baye & Beil, 2006).
A firm can only increase production when the demand is elastic, since improving production results in an increase in gains or profit When demand becomes inelastic, an increase in output will result in a decrease in revenue. In a monopoly market, producing an additional unit will increase profits when marginal revenue exceeds marginal costs (Baye & Beil, 2006). Companies can maximize gains by ensuring marginal revenue equals marginal cost. To achieve the maximum profit they must start by finding a quantity where marginal revenue equals marginal cost. The economic gain is registered when the average income exceeds the average total cost (Baye & Beil, 2006). Monopoly competition also benefits the producer more than the consumer. Because of having control of the market, the monopolist can do anything to see that they gain maximum profit while the consumer has nothing to

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