PerfectCompetitionandMonopoly

PerfectCompetitionandMonopoly - different cost functions...

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An Example of Market Structure Input cells are outlined in red The Market Demand Function has the Form P = A - B.Q Demand Parameters A = 120 B = 0.18 The Total Cost Function for each Firm has the Form TC = F + G.q + H.q^2 Cost Parameters F = 100 G = 10 H = 1 The Perfectly Competitive Equilibrium The Marginal Cost for Each Firm is: MC = 10 + 2q The Average Cost for Each Firm is: AC = 100/q + 10 + 1q Enter the Number of Firms N = 50 The Aggregate Market Supply is: P = 10 + 2Q/50 The Equilibrium Market Quantity is: Q = 500.00 The Equilibrium Market Price is: P = $30.00 Output by Each Firm is: q = 10.00 Average Cost for Each Firm is: AC = $30.00 Profit for Each Firm is: π= $0.00 Minimum Average Cost is: AC* = $30.00 Long-Run Equilibrium Number of Firms is: N* = 50 The purpose of this example is to contrast how a perfectly competitive and monopolistic market achieves an equilibrium. You can experiment with
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Unformatted text preview: different cost functions and market demand functions. With perfect competition try different numbers of firms. In equilibrium, increasing the number of firms by 1 leads to the firms making losses. Contrast this outcome with the monopoly outcome. An Example of Market Structure (cont.) The Monopoly Equilibrium Marginal Cost for the Monopolist is: MC = 10 + 2Q/50 Marginal Revenue for the Monopolist is MR = 120 - 0.36*Q The Profit-Maximizing Quantity is: Q= 275.00 The Market Clearing Price is: P= $70.50 Average Cost for the Monopolist is: AC = $33.68 Profit to the Monopolist is: = $10,125.00 This takes the same demand and cost functions as for the perfectly competitive case and derives the monopoly equilibrium assuming that the monopolist has the same number of plants as there are perfectly competitive firms...
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This note was uploaded on 12/27/2011 for the course ECON 468 taught by Professor Jean-francoishoude during the Fall '10 term at Wisconsin Milwaukee.

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PerfectCompetitionandMonopoly - different cost functions...

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