Four market structures comparison
The four market structures are perfect competition, monopolistic competition, oligopoly, and monopoly. These four market structures are described based on…
In the monopoly market, there is only one firm that produces a product with no close substitutes.
Profit maximization
According to the above graph 1 at point E, marginal cost (MC) equals marginal revenue (MR). The amount of quantity that relates to this point (E) is Qf units. So, the firm produces Qf units. At the Qf units of production, the average cost per unit (AC) is “B” and the average revenue per unit (AR) is “A”. We can see that here AR is greater than the AC. So, we can calculate the total profit of the firm by multiplying the number of Qf units from the difference between AR and AC. In other words, amount of supernormal profit is earned by the firm can be presented from the ABCD rectangular area.
The four market structures are perfect competition, monopolistic competition, oligopoly, and monopoly. These four market structures are described based on…