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SHORT-RUN EQUILIBRIUM
All firms are assumed to aim at maximizing profits or minimizing losses. The monopolist controls his output or price, but not both.
The monopoly maximizes profits where: MR = MC (the necessary condition of profit maximisation)
He cannot produce at less than Qo because MR will be greater than MC. The monopolist will determine his output at Q Xo and set the price at Po and his total Revenue is OQo X OPo and the to total cost will be OCo X bQo and abnormal profits Po CO AB
CHARACTERISTICS OF THE THREE STAGES Stage I Here the Total Physical Product, Average Physical Product and Marginal Physical Product are all increasing. However MPP
TYPES OF UNEMPLOYMENT A person can be either in the labour force or not in the labour force of an economy. The person not included in the labour force includ
Pricing Methods
Buffer stocks and stabilization funds In this case the government buys up part of the supply when output is excessive, stores this surplus, and resells it to consumers in time
Factors influencing Supply Curve State of technology There is a direct relationship between supply and technology. Improved technology results in more supply as with
The Spendthrift Economy This assumes a circular flow of income in a closed economy with no Government sector and no foreign trade. It also assumes the existence of two sect
Suppose that in an isoquant mapping, you should consider three isoquants with 1000, 2000 & 3000 units of output. The price of capital is Rs 2 a unit, and the price of labor is Rs 1
Relationship between AC, AVC, AFC and MC is elucidated graphically by drawing respective cost curves in Figure below. Behaviour of cost curves is elucidated below. Figure:
Q. Controlover Supply of Inputs - sources of monopoly? Furthermore, a monopoly situation may arise because of control over the supply of an essential input -skilled labour, raw
Assume that input prices are constant at r = 1, w = 1, with technology which consists of 5 processes having the following properties: Process Inputs Capital (machine hours)
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