Answer step three. Pricing and you will Returns Behavior under Dominance:

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Answer step three. Pricing and you will Returns Behavior under Dominance:

iii. Beyond OQcuatro or point Rstep step one, the TC again exceeds the TR and the firm enters in a state of loss again.

iv. Given such behaviour, a profit maximizing situation will be in the output range OQ2 to OQ4 or between point R and R1. Profit will be at its maximum where the slope of TC curve equals to slope of TR curve, as per the conditions of equilibrium. As we know, two parallel lines have same slope. Thus, the point at which tangent at TC is parallel to tangent on TR will be the profit maximizing position.

v. To find out such a profit maximizing output level, we draw tangent at each point on TC, as also on TR, between points R and R1. 1 on TC curve is found to be parallel to tangent at point S on TR curve. As such, the vertical distance ekÅŸi mytranssexualdate between TR and TC curves is at maximum at the output level OQ3. Hence, this will be the point of equilibrium satisfying both the conditions and the monopolist will earn a maximum profit SS1.

vi. Tangent on TC curve will be parallel to tangent on TR curve at output level OQ1 as well, but at this point TR exceeds TC. Thus, it is a loss maximization position. One can see that as output increases from this level, per unit loss will decline and the breakeven will be reached at point R where the monopolist will earn a normal profit. Thus, the firm will show no intention to return back to output level OQ1.

vii. Both the point R and R1 representing output levels OQ2 and OQ4 respectively are the break even points where the monopolist is in a situation of no-loss-no-profit.

In case the TC contour stays over the TR curve after all its items, no funds boosting harmony quantity of efficiency can be found at any level of productivity. Such problem, monopolist has to pick whether to keep otherwise avoid design.

It all depends abreast of the point that new monopolist is able to generate cash equivalent to or maybe more than the repaired cost or otherwise not. If it is struggling to exercise, it should prevent creation altogether otherwise it has to continue steadily to generate even after losses on some losses minimizing quantity of production.

Right here a concern arrives, commonly an effective monopolist enter the right position of loss? The reality is that on the short run a great monopolist can be yes get a hold of himself throughout the situation from losings otherwise good shut-off situation. Such as, in the event the markets depresses a lot more resulting in an almost all-round fall in standard rates, the price of the item regarding monopolist also slip.

And that, monopolist funds usually decline plus the situation from losings tend to emerge. Yet not, this can be an incident off short run just. Ultimately, a great monopolist will always be secure a brilliant typical cash.

The new MR-MC experience more often accustomed find out balance since it’s smoother and you can exact. Harmony regarding a great monopolist through the MR-MC approach has been experimented with in the Figure-eleven.5 where MR and you may SMC curves try drawn. In order to bear in mind, in case there is a monopolist, as opposed to best race, one another AR and you will MR contours might be downward slanting.

New tangent at section S

About profile, the fresh new down sloping MR curve intersects the fresh new upward inclining MC contour within section age, the section of equilibrium as both conditions regarding harmony is satisfied: MR = MC and at that point the MC reduce MR from below.

Prices and you will Productivity Behavior – Short run:

Costs below monopoly, like that under prime race, will depend on request and supply conditions on the market. Due to the fact amount of consumers try high actually around monopoly, brand new monopoly is like the fresh pure competitive markets so far due to the fact consult side overall i.elizabeth. industry consult can be involved. The difference is based on brand new demand contour against a company. Lower than dominance, there isn’t any difference in a as well as the agency, for example the fresh demand curve up against the latest monopolist enterprise ‘s the you to faced by the strictly competitive globe, that is down sloping.

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