Question

In a perfectly competitive market, price, and marginal revenue are the same, but in a monopoly,...

In a perfectly competitive market, price, and marginal revenue are the same, but in a monopoly, the price is (except for the first unit) always higher than the incremental revenue. Why is that so? Explain with the help of a short numerical example.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

In a perfectly competitive market, as there is a very large number of buyers and sellers. No seller can influence market price and hence they are all price takers. Also, the additional revenue from an additional unit of output produced will be equal to the price which is constant for each unit of output produced. However, in case of monopoly, there is a single seller with full monopoly power over the price and more can be sold by lowering the price. Hence the marginal revenue curve lies below the demand curve.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. In a perfectly competitive market, sellers sell at a price greater than marginal revenue for...
1. In a perfectly competitive market, sellers sell at a price greater than marginal revenue for each unit sold. average revenue is greater than marginal revenue for each unit sold. sellers sell at a price below marginal revenue. sellers sell at a price equal to average revenue which is also equal to marginal revenue.
Which of the following is true in both a monopoly market and a perfectly competitive market?...
Which of the following is true in both a monopoly market and a perfectly competitive market? a. Price is equal to Marginal Cost b. Long-run Profits are always zero c. Price is greater than Average Variable Cost d. None of the above
For perfectly competitive firms, marginal revenue ______ price; for monopolists marginal revenue ______ price. Multiple Choice...
For perfectly competitive firms, marginal revenue ______ price; for monopolists marginal revenue ______ price. Multiple Choice equals; is less than equals; is greater than equals; equals is less than; equals
1. Compared with a perfectively competitive market a monopoly is inefficient because                    a. it raises...
1. Compared with a perfectively competitive market a monopoly is inefficient because                    a. it raises the market price above marginal cost and produces a smaller output.             b. it produces a greater output but charges a lower price.             c. it produces the same quantity while charging a higher price.             d. all surplus goes to the producer.             e. it leads to a smaller producer surplus but greater consumer surplus. 2. The demand curve of a monopolist typically...
The reason price equals marginal revenue in a competitive market is that: the law prohibits marginal...
The reason price equals marginal revenue in a competitive market is that: the law prohibits marginal revenue from diverging from market price. marginal revenue always is equal to marginal cost. since price is constant, the added revenue from selling one more unit is the price. consumer advocacy groups maintain a steady price. If MR is greater than MC, then:Which of the following statements regarding marginal revenue for a competitive firm is correct? It is never used to determine a firm's...
1. In a perfectly competitive market a firm should be increasing the output when a. marginal...
1. In a perfectly competitive market a firm should be increasing the output when a. marginal revenue is less than marginal cost. b. there are enough customers. c. marginal revenue is greater than marginal cost. d. marginal revenue is equal to marginal cost. 2. All firms operating in a perfectly competitive market produce unique goods. a.True b. False 3. In perfect competition marginal revenue is equal to price. a.True b.False 4.In perfectly competitive market the slope of marginal revenue curve...
For a perfectly competitive firm, the average revenue, price, marginal revenue are equal, while for a...
For a perfectly competitive firm, the average revenue, price, marginal revenue are equal, while for a monopolistically competitive firm only price and average revenue are equal. Select one: True False
1. If at its current production level, a perfectly competitive firm's marginal revenue and longminus?run marginal...
1. If at its current production level, a perfectly competitive firm's marginal revenue and longminus?run marginal cost are equal to $0.50 and its longminus?run average cost is $0.35, which of the following statements is true? A. The firm should expect the market price of its product to fall. B. The firm should expect to earn positive economic profit indefinitely. C. The firm should expect the market supply curve to decrease. D.The firm should expect the market price of its product...
25. __________ Which of the following is true of long‐run equilibrium price in a monopolistically competitive...
25. __________ Which of the following is true of long‐run equilibrium price in a monopolistically competitive market? A) It is equal to average total cost. B) It is less than average total cost. C) It is higher than average total cost. D) It is lower than marginal cost. 27. __________ Total social surplus is maximized in a(n) ________. A) monopolistically competitive market B) perfectly competitive market C) oligopoly D) monopoly 28. __________ A firm is said to have market power...
A perfectly competitive firm will continue to operate in the short run when the market price...
A perfectly competitive firm will continue to operate in the short run when the market price is below its average total cost if the A. price is also less than the minimum average variable cost. B. total fixed costs are less than total revenue. C. marginal revenue is greater than marginal cost. D. marginal cost is minimized. E. price is at least equal to the minimum average variable cost.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT