What is fair return price?
For a competitive firm, profit is maximized when marginal cost ( MC ) = market price. A better regulated price would be one that allowed the monopoly to charge a price — sometimes called the fair-return price — equal to its average total cost, which in economics, also includes a normal profit.
What is QM and QC in economics?
Compare the monopoly price (PM) and quantity (QM) with the competitive equilibrium price and quantity. In a competitive market, the quantity sold is QC, and the sum of producer and consumer surplus is all of the shaded area, both lightly shaded and darkly shaded.
Should the government regulate monopolies?
Monopolies eliminate and control competition, which increases prices for consumers and limits the options they have. Many economists study the impact of monopolies, and all agree that there should be some sort of regulation to increase overall welfare for the country.
How do you calculate fair return?
The Fair Return Price is found where price equals Average Total Cost (DARP=ATC). At this price the monopoly makes a normal profit. Productive Efficiency: Productive efficiency means least average cost.
Are monopolies illegal?
Characteristics of a Monopoly Consumers must accept the terms of a monopolistic firm; they have no choice between providers. Monopolies are illegal within the United States, but there are circumstances where a natural monopoly can occur.
How do you find AFC and AVC?
The AFC is the fixed cost per unit of output, and AVC is the variable cost per unit of output. In the case of Bob’s Bakery, we said earlier that the firm can produce 100 loaves with FC = 40, VC = 500, and TC = 540. Therefore, ATC = TC/Q = 540/100 = 5.4. Also, AFC = 40/100 = 0.4 and AVC = 500/100 = 5.
What does AR mean in economics?
Accounts receivable (AR) is the balance of money due to a firm for goods or services delivered or used but not yet paid for by customers.
What is fair return quantity?
The Fair Return Price is found where price equals Average Total Cost (DARP=ATC). At this price the monopoly makes a normal profit. Each point along every curve corresponds to a price (or cost, or wage) for a specific quantity.
How do you control monopoly?
How to Control Monopolies? (6 Measures) | Markets | Economics
- Anti Trust Legislation: One of the measures which is adopted by the monopoly is to form trusts.
- Control over Prices:
- Organised Consumer’s Associations:
- Effective Publicity:
- Creating Fair Competitions:
- Nationalisation:
Is fair return price productively efficient?
The Fair Return Price is found where price equals Average Total Cost (DARP=ATC). At this price the monopoly makes a normal profit. Productive Efficiency: Productive efficiency means least average cost. Each point along every curve corresponds to a price (or cost, or wage) for a specific quantity.
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Which is the equation for fair price return?
Economic efficiency requires the following triple equation P=MC=minimum ATC. The equality of price and minimum ATC yields productive efficiency (and results in fair price return). The goods are produced in least costly way, and the price is just sufficient to cover average total costs (ATC), so the firm gets a normal profit.
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