Answer to Question #25806 in Microeconomics for ANKIT AGRAWAL

Question

Write briefly that firm’s profit maximisation under different markets (perfect competitive, monopoly, monopolistic and oligopolistic) is dominated by the revenue conditions not by the cost conditions.

Answer 1

Perfect competitive market:
The price is set by the market and producers are price takers. The amount of
output is determined in the point, where MR = MC = Pe, so the optimal amount of
output doesn't depend on the producers wants. They can only cut costs to
increase profits.
Monopoly:
The price is set by the monopolist and is higher, than equilibrium price.
So, he produce less and sets the price higher. It allows to have higher revenue
and profits without cutting the costs.
Monopolistic competition:
Is similar to the monopoly, but there is non-price competition between the
producers, they use product differentiation not to have the direct competitors.
It allows them to set the prices like the monopolists.
Oligopoly:
The prices and revenues depend on the interaction of the several producers,
there are different strategies for them, that very according to the features of
the particular market.