Id 0302 Name: Nabiev Uktam Chapter 14 What is the definition of perfectly competitive market?



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Tourism economics

Monopolists Revenue
For a monopolist MR < P always because the monopolist faces a downward sloping
demand curve
Increasing Q has two effects on revenue
Output effect: higher output raises revenue
Price effect: lower price reduces revenue
To sell a larger Q, the monopolist must reduce the price on all the units it sells. The MR and the demand curves start at the same intercept on the vertical axis because the marginal revenue of the first unit sold equals the price of the good. However, the
monopolist’s marginal revenue on all units after the first is less than the price of the good
Therefore, MR < P and the marginal revenue curve lies below its demand curve.
MR could even be negative if the price effect exceeds the output effect
What is price discrimination?
In competitive markets, many firms sell the same product; therefore, if one firm charges any consumer or group of consumers a higher price, it will not be able to sell the product. However, if the firm is a monopolist, it may try to sell to different buyers at different prices. If a monopolist can perfectly discriminate in price, he will charge each buyer exactly the price that the buyer is willing to pay. Consequently, all the surplus goes to the monopolist, and there is no consumer surplus and no deadweight loss.
In the real world, perfect price discrimination is impossible because firms do not know the willingness of each buyer to pay. So firms divide customers into groups based on some observable traits that are likely related to their willingness to pay, such as age.
Chapter 16
Monopolistic competition
Refers to markets where there are many sellers, each firm produces a differentiated product and free entry and exit from the industry. Please note that even if the products are similar, they are not identical. The ability of firms to differentiate their product creates a monopolistic component and causes the market to move away from perfect competition.
A monopolistically competitive firm determines the profit-maximizing quantity and price in much the same way as a monopolist. A monopolistic competitor, like a monopolist, faces a downward-sloping demand curve and will therefore choose some combination of price and quantity along its perceived demand curve.

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