We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

Microeconomics - Essay Example

Comments (0) Cite this document
Microeconomics 08/26/2012 Microeconomics In 2007, the potato chip industry in the Northwest was competitively structured and in long-run competitive equilibrium; firms were earning a normal rate of return and were competing in a monopolistically competitive market structure…
Download paper
Read TextPreview

Extract of sample

Now, there is only a single supplier of potato chip all across the region (Brigham, 1976). As all firms decided to merge together to create a single monopoly, now there will be barriers to entry in the industry as no further firms can enter the market easily and threaten the existence of existing firms. The firm is now protected against any other foreign threat as no other firm can enter the market to compete with it. This monopoly is owned by a single firm and so the business enjoys the benefit of having the entire market share to itself without any pressure or constraints. However, this monopoly is not a natural monopoly and so it can charge its customers with whatever price suits it and gain higher profits. A monopoly also produces goods and services by producing required quantity at a price where marginal cost equals marginal revenue just like any other market structure. But, it can also choose to set a price at which quantity is demanded where price might exceed the marginal cost (Case, 1996). Monopoly is highly beneficial to society and consumers as well. Large firms usually attain the benefit of gaining from economies of scale. Economies of scale is increase in efficiency as the number of goods produced by a firm increases. Due to economies of scale, the Average cost curve goes downwards. If the fall in Average cost curve is very large so a monopolist can charge its consumers a lower price and generate a higher output than the monopolistic competition of the market. This way, monopolist maximizes the profits. Marginal cost becomes equal to marginal revenue at this point. This means that now the consumers can enjoy potato chips at a lower price than it was when the market was monopolistic due to huge producer surplus. The society gains as well (Allen, 2005). As this monopoly is privately owned, and not a government regulated natural monopoly, government does not have any say here. But it can produce revenues for the entire economy in form of more and more exports. This single firm can take advantage of economies of scale from its home economy and maintain a cost advantage through which it can exploit the international market and can sell at a relatively cheap rate abroad. Governments do gain when the economies prosper as now government receives more money in form of taxes which it can utilize in infrastructure and other welfare activities (Allen, 2005). However, the change from monopolistic market structure to monopoly does come with a lot of changes in profits and revenues. In a monopolistic competition, the industry comprise of a huge number of firms, each one of those have relatively small size as compared to total market. That is why; no firm can affect the overall market price because of its small size. But, in a monopolistic structure, firms can differentiate their output by having some control over price (Allen, 2005). The short-run equilibrium of monopolistic market is achieved by setting the price where marginal cost is equal to marginal revenue. The profits of a firm arise by entrance of similar products by different firms in the market; where every firm competes for only a percentage of the total demand. Whenever a new firm enters the market, the demand curve shifts downwards due to which profits remain no more (Allen, 2005). Now due to large entrants of firms in the market, the individual demand curve shifts to the left. Here, the zero profit condition arises where ... Read More
Cite this document
  • APA
  • MLA
(“Microeconomics Essay Example | Topics and Well Written Essays - 1500 words”, n.d.)
Retrieved from https://studentshare.net/other/11442-microeconomics
(Microeconomics Essay Example | Topics and Well Written Essays - 1500 Words)
“Microeconomics Essay Example | Topics and Well Written Essays - 1500 Words”, n.d. https://studentshare.net/other/11442-microeconomics.
  • Cited: 0 times
Comments (0)
Click to create a comment
These constructions have increased the demand for steel in the Chinese economy and China needs to export large amount of iron and iron ore from foreign countries especially from Australia. Though China has a rich reserve of minerals and metals in their own territory but they are still a net importer of iron ore.
5 Pages(1250 words)Essay
One of the primary elements that new firms face is in the real of advertising. Oftentimes, established firms are able to significantly outspend firms that are wishing to enter the market. This provides the established firms with a significant advantage over newly emergent companies and works to differentiate the products to a significant degree.
3 Pages(750 words)Essay
A price floor is a legal minimum on the price of a good or service. This essay discusses two outcomes, that are probable when the government entails a price floor, gives comparative research on price floor and equilibrium price and explaines how the minimum wage affects the labor market.
2 Pages(500 words)Essay
Each question is worth 5 marks and the total mark for this assignment is 10. This assignment is worth 10% of the final grade. 3. The assignment must not exceed 1000 words and must be submitted typed,
2 Pages(500 words)Essay
It then allocates the resources available in the society to many potential uses. It also seeks to understand how national economic policies affect these households and firms. According to Tietenberg (2006), microeconomic issues regarding the environment come in
4 Pages(1000 words)Essay
This is just a simple explanation of these two economic principles because, in reality, it is a lot more complicated than that. Microeconomics is to do with the market’s
2 Pages(500 words)Essay
) The banks and investors can take advantage of the covered in arbitrage by investing in foreign currency and locking the position and eliminating the foreign exchange risk by entering into a forward contract. The forward contract involves buying the home currency at a future
2 Pages(500 words)Essay
In a special manner, microeconomics dwells on behaviors related to demand and supply and determining prices and output in certain markets. On a broader perspective, microeconomics addresses smaller issues, putting much
5 Pages(1250 words)Essay
The third approach is the last dollar rule, whereby the firm should produce at a point where the last dollar it spends on an input
3 Pages(750 words)Essay
Market failure may occur when there is a negative externality that imposes an external cost on the society. The efficient level of coal gas mining for the society is lower than the market quantity. In effect, the
6 Pages(1500 words)Essay
Let us find you another Essay on topic Microeconomics for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us