Perfect Competition vs. Monopoly. Microeconomics – Dr. D. Foster. How are they the same?. Profit maximizing. Same rule for profit maximizing. Cost structures. Calculate their economic profit as TR-TC. How are they different?. Monopoly. Perfect Competition. Only 1 firm. Entry barriers.
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MR* = d*
MR = d
The market determines the equilibrium price.
Market supply increases and the market price falls.
For the firm, price = demand = MR.
LR equilibrium – firm earns 0 economic profit; is allocatively and productively efficient.
For the firm, find ATC to determine profit.
With a positive economic profit, firms enter.
The firm = the market
The firm must find MR.
Find MC to determine Q*.
Price off the demand.
Find ATC to determine the firm’s economic profit.
Without entry, this persists in the long run.
In LR – firm is allocatively and productively inefficient.