There is a clear understanding that society is full of competitive markets and the temptation to get more. Getting more can ultimately become a bigger issue than expected for some businesses. Owning a business is a gamble in various ways form financial dilemmas to staffing problems to even remaining functional. How a business structure their facilities and operate will allow them the chance to find out what actually works best for them as well as their customers.
According to N. Gregory Mankiw, competitive market is “a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker.” The structure of a market can be different depending on the features of competition within the firm. The perfect …show more content…
Gregory Mankiw. Therefore, a monopolistic market exists when there is only a single producer with many consumers. The market lacks economic competition in producing goods and services and inability to provide for substitute goods. Consequently, the single producer has full control over the pricing of its output. That is, the producer is the price maker and can determine the level of prices by deciding on the quantity of goods to produce. A good example of this market is in the public utility firms where the cost of providing services may be so high. Therefore, it will be inefficient to have more than one provider. However, there are no substitute goods for these services, and the consumers will have very few options. “If the producer decides to raise their prices, consumers will have no option but to continue buying the goods and services,” according to Israel Kirzner. Hence, the seller is the price …show more content…
Gregory Mankiw stated, “The monopolistic market has very strong barriers to their entries, and this discourages market competition.” Consequently, the market will limit the output up to where the marginal revenue equals marginal cost (MR= MC) to maximize the proceeds. The price of the goods and services will be higher and the quantity produced will be lower than the equilibrium price and quantity of the market. The efficient equilibrium for a monopolistic market is where the average revenue equals marginal cost (AR=MC). The MC serves as the supply curve while the AR represents the demand curve. At the point where MR=MC, there is no proper maximisation of the surpluses for both consumers and
According to N. Gregory Mankiw, competitive market is “a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker.” The structure of a market can be different depending on the features of competition within the firm. The perfect …show more content…
Gregory Mankiw. Therefore, a monopolistic market exists when there is only a single producer with many consumers. The market lacks economic competition in producing goods and services and inability to provide for substitute goods. Consequently, the single producer has full control over the pricing of its output. That is, the producer is the price maker and can determine the level of prices by deciding on the quantity of goods to produce. A good example of this market is in the public utility firms where the cost of providing services may be so high. Therefore, it will be inefficient to have more than one provider. However, there are no substitute goods for these services, and the consumers will have very few options. “If the producer decides to raise their prices, consumers will have no option but to continue buying the goods and services,” according to Israel Kirzner. Hence, the seller is the price …show more content…
Gregory Mankiw stated, “The monopolistic market has very strong barriers to their entries, and this discourages market competition.” Consequently, the market will limit the output up to where the marginal revenue equals marginal cost (MR= MC) to maximize the proceeds. The price of the goods and services will be higher and the quantity produced will be lower than the equilibrium price and quantity of the market. The efficient equilibrium for a monopolistic market is where the average revenue equals marginal cost (AR=MC). The MC serves as the supply curve while the AR represents the demand curve. At the point where MR=MC, there is no proper maximisation of the surpluses for both consumers and