by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Marginal Revenue and Marginal Cost for a Monopolist? In the real world, a monopolist often does not have enough information to analyze its entire total revenues or total costs curves. After all, the firm does not know exactly what would happen if it were to...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Total Cost and Total Revenue for a Monopolist? The total cost curve has its typical shape – total costs rise and the curve grows steeper as output increases. Low levels of output bring in relatively little total revenue, because the quantity is low....
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How Do Monopolists Set Price with the Demand Curve? A perfectly competitive firm acts as a price taker, so we calculate total revenue taking the given market price and multiplying it by the quantity of output that the firm chooses. A flat perceived demand curve means...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How Does Intellectual Property Promote Innovation? Innovation takes time and resources to achieve. Suppose a company invests in research and development and finds the cure for the common cold. In this world of near ubiquitous information, other companies could take...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a Legal Monopoly? For some products, the government erects barriers to entry by prohibiting or limiting competition. Under U.S. law, no organization but the U.S. Postal Service is legally allowed to deliver first-class mail. Many states or cities have laws or...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a Natural Monopoly? Economies of scale can combine with the size of the market to limit competition. This arises when the market has room for only one producer. If a second firm attempts to enter the market at a smaller size then its average costs will be...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Productive and Allocative Efficiency in Perfectly Competitive Markets? When profit-maximizing firms in perfectly competitive markets combine with utility-maximizing consumers, something remarkable happens: the resulting quantities of outputs of goods and...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Long-Run Equilibrium in a Perfectly Competitive Market? No perfectly competitive firm acting alone can affect the market price. However, the combination of many firms entering or exiting the market will affect overall supply in the market. In turn, a shift...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What Guides Decisions to Enter or Exit a Market in the Long Run? It is impossible to precisely define the line between the short run and the long run with a stopwatch, or even with a calendar. It varies according to the specific business. Therefore, the distinction...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What do Marginal Costs and the Supply Curve look like for a Perfectively Competitive Firm? For a perfectly competitive firm, the marginal cost curve is identical to the firm’s supply curve starting from the minimum point on the average variable cost curve. To...
