For profit maximization, competitive and monopoly firms are same.
But, still there is a difference between the two.
For
a competitive firm:- P=MR=MC
For
a monopoly firm:- P>MR=MC
So,
you see, MR & MC are equivalent for both type of firms but the relationship
between Price, MC & MR differ for both.
For
a competitive firm: Price = Marginal
Revenue = Average Revenue = Demand = Marginal
Cost.
So, you see, MR & MC are equivalent for both type of firms but the relationship between Price, MC & MR differ for both.
For a competitive firm: Price = Marginal
Revenue = Average Revenue = Demand = Marginal
Cost.
For a monopoly firm: Price > Marginal
Revenue = Marginal Cost.
Here for a monopoly, in panel (b) the demand curve is shifted up
from D1 to D2. The new Marginal Revenue curve, MR2 , intersects the Marginal
Cost curve at a larger quantity Q2. But the shift in the demand curve is in a
way that the price charged is the same. Shifts in demand normally cause changes
in both quantity and price.
If we study the monopolist demand curve, we observed that monopoly
market using the market demand curve and the firm's cost curves. However, we
don't find any supply curve.
So, what exactly happened to the supply curve? Well, like any
other firm, monopolist also make decision about what quantity to supply
but it doesn't have a supply curve. If we go definition, then supply curve
tells us that firms choose to supply at any given price. And, it makes sense
for competitive firms as they are price takers. But, a monopolist is a
price-maker. So, there is no meaning to know at what price firm would sell what
quantity because monopolist firm sets the price at the same time it chooses the
quantity to supply.
However, the monopolist decision about what quantity to supply is
difficult to separate from the demand curve it gets. Because shape of demand
curve determines the shape of MR curve which determines the profit maximization
of the monopolist.
That's
why, monopolist has a demand curve but not a supply curve.
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