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The Monopoly Of Wonks - Essay Example

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(2003).A market is condition whereby a potential seller of a commodity meets a potential buyer and a means of exchange is available. We have several types of market structures namely; perfect competitive, monopoly, oligopoly, and monopolistic competition…
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The Monopoly Of Wonks
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The Monopoly Of Wonks

Download file to see previous pages... This will enable the firm to fund high cost capital investment spending. Successful research may be used to improve on products and lower cost in the long-term.
The government will have a chance to regulate different varieties of products at the same time to prevent exploitation of the consumers by the firm. This will save the government spending on check-ups.
The government will also be able to tax the company easily. The government gets much tax revenue in the monopoly companies than in monopolistic competition. In the monopolistic market are free to enter and leave at any time since there are no legal barriers. Lack of restrictions demolishes government effort to collect tax revenue from all the stakeholders.
Consumers are likely to buy chips in lower prices since Wonks will be enjoying economics of scale, its production cost will lower transferring this to consumers by charging less cost per unit of potatoes sold.
Wonks Company will be a price-maker, since it makes its own pricing and output decisions. In the end, the price of a product will be determined by its cost function, demand, its objectives and certain government regulations.
The main objective, which leads Wonks to merge as one firm, is to maximize profit. i.e. T.C.< TR. The first thing Wonks company needs to consider is the revenue to earn when it operates as a monopoly firm. The marginal revenue, which is change in total revenue that occurs as a firm, changes its output.
It is expected that in long run, Wonks chips company will increase its output since there are no other players in the market. If it does so, it has to lowers the price. As a result, marginal revenue will be below its price.
Perloff, Jeffrey M. (2004). If marginal revenue is greater than marginal cost, i.e. M.R>MC, the firm will increase profit by increasing output. If marginal revenue is less than marginal cost (M.R ...Download file to see next pagesRead More
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