What is the supply curve of a monopoly?
What is the supply curve of a monopoly?
There is no supply curve for a monopolist. This differs from a competitive industry, where there is a one-to-one correspondence between price (P) and quantity supplied (Qs).
Why monopoly firm has no supply curve?
A monopoly firm has no well-defined supply curve because of the fact that output decision of a monopolist not only depends on marginal cost but also on the shape of the demand curve. As a result, shifts in demand do not trace out a series of prices and quantities as happens with a competitive supply curve.
What can in general be said about a monopoly’s supply curve?
What can, in general, be said about a monopoly’s supply curve? The concept of a supply curve is meaningless in the context of a monopoly. has an average cost curve that is decreasing at the point where it crosses the demand.
Does monopolistic competition have supply curve?
Therefore, there is no one-to-one relationship between quantity and price—a monopolistic market has no supply curve. You can mouse over a curve to identify it.
Do pure monopolists maximize MR?
At that point, profit is maximized. If the monopolist increases production beyond MR = MC, then the marginal cost will be greater for each additional unit than marginal revenue, which will decrease profits, since costs continue to increase.
Why is there no market supply curve under conditions of monopoly quizlet?
Why is there no market supply curve under conditions of monopoly? Output decisions depend not only on marginal cost but also on the demand curve. Shifts in demand lead to changes in price, output, or both. There is no one-to-one correspondence between price and the seller’s quantity.
Why is there a social cost to monopoly power?
Monopoly creates a social cost, called a deadweight loss, because some consumers who would be willing to pay for the product up to its marginal cost (MC), are not served. In a monopoly, there is no supply curve because monopolists are price setters and not price takers.
Why is there a deadweight loss in a monopoly?
The monopoly pricing creates a deadweight loss because the firm forgoes transactions with the consumers. Monopolies can become inefficient and less innovative over time because they do not have to compete with other producers in a marketplace. In the case of monopolies, abuse of power can lead to market failure.
Why is the MC curve the supply curve?
The marginal cost curve is a supply curve only because a perfectly competitive firm equates price with marginal cost. This happens only because price is equal to marginal revenue for a perfectly competitive firm.
Is supply curve same as marginal cost?
Provided that a firm is producing output, the supply curve is the same as marginal cost curve. The firm chooses its quantity such that price equals marginal cost, which implies that the marginal cost curve of the firm is the supply curve of the firm.
Can a supply curve be constructed under monopoly?
It may happen that a monopolist, given his MC curve, may supply a particular quantity at different prices depending on the elasticity of demand. Thus, the construction of supply curve from the MC curve is impossible under monopoly or under any branch of imperfect competition.
How does a monopoly determine its profit maximizing output?
In Panel (b) a monopoly faces a downward-sloping market demand curve. As a profit maximizer, it determines its profit-maximizing output. Once it determines that quantity, however, the price at which it can sell that output is found from the demand curve. The monopoly firm can sell additional units only by lowering price.
How are monopolists affected by the downward sloping demand curve?
Because it is the only supplier in the industry, the monopolist faces the downward-sloping market demand curve alone. It may choose to produce any quantity. But, unlike the perfectly competitive firm, which can sell all it wants at the going market price, a monopolist can sell a greater quantity only by cutting its price.
Where does the marginal revenue curve lie for a monopolist?
The marginal revenue curve for a monopolist always lies beneath the market demand curve. To understand why, think about increasing the quantity along the demand curve by one unit, so that you take one step down the demand curve to a slightly higher quantity but a slightly lower price.
