Econ … my weakest area grhh. I’m trying to compare monopolistic firms & monopoly firm. Why is it that the Demand curve for monopolistic firms are lower than the ATC while for monopoly are higher than the ATC. OK logically the demand is higher on monopoly because it only has 1 producer, but what cause it to be higher than ATC curve?
Anyone?
Demand curve can be higher or lower than ATC in either scenario. Demand and a firms average total cost have nothing to do with each other. They are determined independently. What level a firm decides to produce at… that’s a different question. What are you really trying to ask?
not sure what query is but know that monopolies 1 - inefficient 2- restrcit output,m raise price 3. want to max profit, not price 4. create deadweright loss 5. sometines pricer discriminate 5. high barriers to entry 5. can be diffeentiated produyct but does not have to be 6. types: legal, natural, local 7. downward facing demand curve 8. price SEARCHER, never takers
Right I see now, just revisited the materials again. I get confused re: demand curve & marginal revenue curve. The key point to remember here that firms always try to produce at MR = MC. In monopoly or monopolistic environment this Q will be at the point where it intersect the ATC not in the minimum point, in comparison with perfect competition where it does intersect with the ATC at its lowest point. Is my understanding correct here?
In monopoly or > monopolistic environment this Q will be at the > point where it intersect the ATC not in the > minimum point, in comparison with perfect > competition where it does intersect with the ATC > at its lowest point. Is my understanding correct > here? hmm, good one. For the perfrct comp, you are right, they want the lowest, that is where they hit MES (min effich scale) and economies of scale at at their max. recall that econ of scale == lower ATC as output increases think of firms addding ATMS and reducing tellers. why do it? econ of scale BOOM, keep em coming