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Graphical Analysis


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Graphical Analysis

  1. 1. GraphicalAnalysis
  2. 2. Graphical Analysis Price and output determination on a purely competitive firm is shown and explained trough graphical illustrations. Such graphs indicate the most profitable output and least loss output. The equilibrium of the firm (through the MR = MC approach) under the short run and long run are also presented.
  3. 3. Figure 5.2
  4. 4. Figure 5.3
  5. 5. Figure 5.4
  6. 6. Pure monopoly There is only one firm that produces the product. The demand of the product of the firm is the same as the market demand for the product. Since there is only one firm, it is also the industry. Its demand curve is the industry demand curve which is downsloping. This means a monopolists can only increase his sales by offering a lower nit price for its product. If he does this, his marginal revenue (additional income) is lesser than the price.
  7. 7. Table 5.2
  8. 8. Figure 5.5
  9. 9. Figure 5.6
  10. 10. Monopolistic Competition The demand curve of a firm under this market structure is highly elastic (but not perfectly elastic like that of the firm under the pure competition) because of the presence of a relatively large number of competitors selling close-substitute products.
  11. 11. Oligopoly Under this market structure, there are very few firms which produce homogeneous or differentiated products. Collusion is the common practice among the oligopolists. This is a secret agreement among them to have a common price and to manipulate their output for their own business interest. Thus, their individual profits are the same as those enjoyed by pure monopolists.
  12. 12. e.) Profit maximization of a firm under collusive oligopolyis basically the same as that of pure monopolist. Oligopolistsagree together with respect to both price an production in orderto gain maximum profits. A very good example is the OPEC.