How does a discriminating monopolist attain equilibrium?

How does a discriminating monopolist attain equilibrium?

A discriminating monopolist reaches equilibrium and hence maximises profit when he equates the marginal revenue(s) in-both the markets, i.e., MR1 = MR2. If this condition holds total revenue will be maximum and revenue maximisation subject to cost constraint implies profit maximisation.

What is price discrimination show the equilibrium of a price discriminating monopolist?

ADVERTISEMENTS: Equilibrium under Price Discrimination! Under simple monopoly, a single price is charged for the whole output; but under price discrimination the monopolist will charge different prices in different sub-markets.

What is meant by discriminating monopoly?

A discriminating monopoly is a market-dominating company that charges different prices—typically, with little relation to the cost to provide the product or service—to different consumers. By catering to each type of customer, the monopoly makes more profit.

How does the equilibrium of the firm under perfect competition differ from that of a monopolist?

A significant difference between the two is that while under perfect competition price equals marginal cost at the equilibrium output, under monopoly equilibrium price is greater than marginal cost. Consequently, under monopoly, average revenue (or price) is greater than marginal revenue at all levels of output.

What is discriminating monopoly How is price determined under discriminating monopoly?

A discriminating monopolist also aims at maximisation of profit. He determines price and output of his product in such a way that he attains maximisation of his profit.

Is Equilibrium achieved in monopoly?

Monopoly Equilibrium and Price Elasticity of Demand: ADVERTISEMENTS: Since marginal cost can never be negative, equality of marginal revenue and marginal cost cannot be achieved where price elasticity of demand is less than one and marginal revenue is therefore negative.

Why does the monopolist practice price discrimination?

In monopoly, there is a single seller of a product called monopolist. The monopolist has control over pricing, demand, and supply decisions, thus, sets prices in a way, so that maximum profit can be earned. This practice of charging different prices for identical product is called price discrimination.

How does price discrimination affect consumer surplus?

In pure price discrimination, the seller will charge the buyer the absolute maximum price that he is willing to pay. This allows the producer to capture more of the total surplus by selling to consumers at prices closer to their maximum willingness to pay.

Why do monopolies price discriminate?

How is equilibrium at perfect competition?

Under perfect competition, an individual firm is a price taker, that is, it has to accept the prevailing price as a given datum. Since marginal revenue is the same as price (or average revenue) under perfect competition, the firm will equalise marginal cost with price to attain equilibrium output.

What is perfect competition explain its characteristics and equilibrium of a firm under perfect competition?

Pure or perfect competition is a theoretical market structure in which the following criteria are met: All firms sell an identical product (the product is a “commodity” or “homogeneous”). All firms are price takers (they cannot influence the market price of their product). Market share has no influence on prices.

What are the conditions for equilibrium in monopoly?

Equilibrium in Monopoly. The conditions for Equilibrium in Monopoly are the same as those under perfect competition. The marginal cost (MC) is equal to the marginal revenue (MR) and the MC curve cuts the MR curve from below. In this article, we will understand Equilibrium in Monopoly in detail.

Is the diagram of a monopoly the same?

The diagram for a monopoly is generally considered to be the same in the short run as well as the long run. Profit maximisation occurs where MR=MC. Therefore the equilibrium is at Qm, Pm.

What is the equilibrium wage in a monopsony market?

Equilibrium in a Monopsony Market. Hence, the equilibrium wage is $20, and the equilibrium number of workers employed is 3. Because the monopsonist is the only demander of labor in the market, it has the power to pay wages below the marginal revenue product of labor and to hire fewer workers than a perfectly competitive firm.

How does a monopolist seek to maximise profits?

Monopoly Graph. A monopolist will seek to maximise profits by setting output where MR = MC. This will be at output Qm and Price Pm. Compared to a competitive market, the monopolist increases price and reduces output.