Figure 1. The Perceived need Curve for a Perfect Competitor and also a Monopolist.

You are watching: The demand curve as perceived by a perfectly competitive firm is __________ .

(a) A perfect competitive firm perceives the demand curve the it encounters to be flat. The level shape means that the firm can sell either a low quantity (Ql) or a high quantity (Qh) at precisely the exact same price (P). (b) A monopolist awareness the need curve the it deals with to it is in the same as the market need curve, which because that most items is downward-sloping. Thus, if the monopolist choose a high level of calculation (Qh), it have the right to charge just a relatively low price (Pl); conversely, if the monopolist choose a short level of output (Ql), it deserve to then charge a greater price (Ph). The challenge for the monopolist is to choose the mix of price and also quantity that maximizes profits.


Figure 2. Total Revenue and also Total cost for the HealthPill Monopoly. Total revenue for the syndicate firm dubbed HealthPill first rises, then falls. Short levels the output lug in fairly little full revenue, due to the fact that the amount is low. High levels of output bring in reasonably less revenue, because the high amount pushes down the market price. The full cost curve is upward-sloping. Earnings will be highest at the quantity of output where complete revenue is most above total cost. The profit-maximizing level of calculation is not the exact same as the revenue-maximizing level the output, which should make sense, due to the fact that profits take prices into account and also revenues perform not.

Figure 3. Marginal Revenue and Marginal cost for the HealthPill Monopoly. For a monopoly like HealthPill, marginal revenue decreases together it sells added units of output. The marginal expense curve is upward-sloping. The profit-maximizing choice for the monopoly will it is in to produce at the quantity where marginal revenue is equal to marginal cost: that is, grandfather = MC. If the monopoly produces a lower quantity, then mr > MC at those level of output, and also the firm deserve to make higher profits by expanding output. If the firm produces at a greater quantity, climate MC > MR, and also the firm deserve to make greater profits by reducing its amount of output.

Figure 4. The Monopolist’s Marginal Revenue Curve versus demand Curve.

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since the market demand curve is conditional, the marginal revenue curve for a monopolist lies in ~ the need curve.