Monopoly and Monopolistic Competition Mathematics & Economics Paper (Other (Not Listed) Sample)
the tasks differentiates and solves question associated with monopolistic COMPETITION. The sample is a question and answer economic paper.source..
Monopoly and Monopolistic Competition
Lump-sum tax tends to reduce the monopolist’s excess profit. For instance, a tax imposition on the firms by the government will reflect an increase in fixed cost. As a result, since fixed cost happens to be independent of output level, such tax imposition will not alter the monopolist’s Marginal Cost (MC). Thus, the monopoly market’s equilibrium will remain the same.
Similarly, prices and output will remain unchanged. Therefore, the only nota le change will be the monopolist’s profit reduction. It’s worth noting and restating that the output and pricing decisions will be undisturbed in this scenario.
Also referred to as the social cost of monopoly, it occurs because the monopolist is always capable of charging higher prices than restrict on total output. As such, welfare is reduced as the rise in price tends to reduce the surplus by the consumers. Similarly, this reflects deadweight welfare loss. Some of the welfare lost happens to be a transfer to the producers purely and employing higher profits.
Under the competitive condition, a monopolist might be placed better to interfere and exploit returns that seem to be increasing. This scales leasing to a level of equilibrium, consequently giving outputs that are high at lowered prices. Therefore, players in a monopoly aren’t guaranteed profits. Monopolistically, the welfare loss is equal to the area ABC below: -
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