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Microeconomics as a Branch of Economics - Essay Example

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The researcher of this essay aims to analyze Microeconomics. as a branch of economics, that deals with the behavior of both individuals and firms in making their decisions on how to utilize limited economic resources. In microeconomics, an individual focuses on maximizing their utility subject…
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Microeconomics as a Branch of Economics
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Download file to see previous pages The graph shows the relationship between the three situations above, Where MR=Marginal Revenue, AR=Average Revenue, and MC=Marginal Cost. The output is represented by Q while price by P. A monopoly may want to reduce output from Q1=17.5units to Q3=25units so that he can sell at a higher price P3=$35 (Asian Development Bank, 2002). However, economies of scale may occur leading to a shift in marginal cost from MC1 to MC2 (Pirayoff, 2004).This shift may lead to an increase in monopolist output from Q1=17.5 Units to Q2=40 units. This may lead to a decrease in price from a competitive price to a lower price P2=$30 despite the availability of a monopoly price =$35 (Brakman and Heijdra, 2004).
The reasons why there is no supply curve for a monopoly is because, in a monopoly market structure, the market is under the control of a single supplier, hence no need for supply curve (Dwivedi, 2006).
(b)A gardener states that for only $1 in seeds, she has been able to grow over $20 produce-enormous profits. Do you agree or disagree with her/ explain? Yes, I agree with her because if she was operating in a monopolistic competition, it is possible to earn enormous profits in the short run as shown in the diagram. The graph shows the relationship between the three situations above, Where MR=Marginal Revenue, AR=Average Revenue, and MC=Marginal Cost. The output is represented by Q while price by P.  A monopoly may want to reduce output from Q1=17.5units to Q3=25units so that he can sell at a higher price P3=$35 (Asian Development Bank, 2002). However, economies of scale may occur leading to a shift in marginal cost from MC1 to MC2 (Pirayoff, 2004).This shift may lead to an increase in monopolist output from Q1=17.5 Units to Q2=40 units. This may lead to a decrease in price from a competitive price to a lower price P2=$30 despite the availability of a monopoly price =$35 (Brakman and Heijdra, 2004).The reasons why there is no supply curve for a monopoly is because, in a monopoly market structure, the market is under the control of a single supplier, hence no need for supply curve (Dwivedi, 2006). ...Download file to see next pagesRead More
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