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Purely Competitive Vs Monopoly in two industries Essay

There are two types of industry wherein a businessman could put his cash on: the monopoly and the purely competitive one. This paper explains the case if a worker in a purely competitive industry and a worker in a monopoly industry returns the same or different marginal revenues on the case that the labor market is purely competitive if they have exactly the same marginal product and their product price is the same. Citing the difference between the types of industry will give us an idea to decide with the case given:

Differences between Monopoly and Competition (Hartcourt, 2001)

Monopoly

  •  The only producer of the goods
  • The demand curve has a downward slope.
  • “ price maker”
  •  Lowers the price to increase sales

Competition

  • Competes with companies producing the same products
  • The demand curve is horizontal
  • “price taker”
  • Sells as much or as little at same price.

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Marginal revenue is described as the extra revenue that an excess product unit will bring to the industry (Schenk, 2002). Whether a worker is in either a purely competitive or a monopoly, and considering the case stated on the previous paragraph, both workers will return the same marginal product return since their marginal products, as well as the product price are the same.

MPR = total revenue/quantity of units sold ( Hartcourt, 2001)

If we think not that critically, the prices introduced by the workers from different industries are the same, and the number of units to be sold is also the same, the MPR will be the same. But from the bulleted descriptions of monopoly and competitive industry, the demands are different. For the monopoly, the demand is sloping downward; but form the competitive, the demand is the same as represented by the horizontal curve. For a competitive industry, the MPR is directly proportional to the price, but in a monopoly industry, the demand is decreasing, so the MPR will decrease also, leaving us the conclusion that the MPR’s for the two are different.

References

Hartcourt, Inc. (2001). Monopoly. Retrieved April 22, 2008, from http://www.wcc.hawaii.edu/facstaff/briggs-p/Microeconomics/Chap_15.pdf

Schenk, Robert. (2002). Cybereconomics. From Elasticity to Marginal Revenue. Retrieved April 22, 2008 from Cybereconomics.

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