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Assume that a pure monopolist and a purely competitive firm have the same unit costs. Contrast the two with respect to $(a)$ price, $(b)$ output, $(c)$ profits, $(d)$ allocation of resources, and $(e)$ impact on the distribution of income. since both monopolists and competitive firms follow the $M C=M R$ rule in maximizing profits, how do you account for the different results? Why might the costs of a purely competitive firm and those of a monopolist be different? What are the implications of such a cost difference?
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Firm Behavior and the Organization of Industry
Markets and Welfare
June 4, 2021
Assume that a pure monopolist and a purely competitive firm have the same unit cost. Construct the two with respect to impact on the distribution of income
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the price that monopolise charges that and to be lowered in the price of competitive market firm would tell that and the opposite would be true. In terms of output, the monopolist would produce less at a higher price, and the profits of a monopoly is significantly higher than a profit of a head of a firm. And in fact, in the long run, the competitive firm and 20 profits. Ah, internal allocation of resources. The competitive firm does not have an accurate inefficiency while the marvelous does and it Ah, I monopolistic monopolise. Ah, and to create that we'd lost and the when I monopoly income would be grated in the consumer surplus resulting in Ah, any inequality in the distribution of income? No. The results differ because of the demanding face monopolist basis, a downward sloping demand with marginal revenue that's lowered into the bend and ah, competitive firm faces of the man That's perfectly elastic. Where the man was marginal revenue. Uh, so why do ah, why do I do cost differ between ah ma competitive firms and monopolists? And yesterday you did, in general the average total cost of a monopoly because they produce for all of the market would be on a lower average total cost compared to what? The real competitive firms producing it. This quantity, let's see that three competitive firms was producing. They'd be having a hover. Ah, higher average total cost in a monopoly would. And the implication is that monopolies, if regulated and afford to charge a lower price than if the market was a high cost competitive one. You can't afford it, but it doesn't mean they will, so yeah.
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