Price Under Perfect Competition And Monopoly Economics Essay

The cost of life in east Malaysia is higher than in peninsular because of the expensive things in Sabah and Sarawak. The things are really expensive in Sabah and Sarawak because of the authorities regulation. The national cabotage policy brings this state of affairs to East Malaysia. In Caboatge policy registered vass merely allowed to lading ladings in the ports of Malaysia. The Port Klang is the chief centre for port in Malaysia. All ladings must travel to Port Klang before come ining other ports. The ships which come ining other ports must registered under Malayan authorities. Sabah and Sarawak needed the services from Port Klang. The distribution charges of the proprietors non controlled by the authorities. Kota Kinabalu is 1500km far than Port Klang. Ships from foreign state non allowed utilizing ladings in Kota Kinabalu even though Sabah closer to those states. The difference in merchandises in East Malaysia and Peninsular is because of this Caboatge policy. This make down the East Malaysian ‘s economic growing. The East Malaysian ‘s monetary value is higher as 20 to 30 per centum comparison with Peninsular.

The 2nd ground is because of the authorities revenue enhancement and subsidisation. Government revenue enhancement for family merchandises points for illustration rice is higher than in Peninsular. This causes the bargainers to increase the monetary value of the points. There are a batch of revenue enhancements authorities hole in East Malaysia such gross revenues revenue enhancement, good and service Tax, income revenue enhancement and personal income revenue enhancement. The authorities earns more on these revenue enhancements. Political parties are request to diminish the revenue enhancements rates, authorities garbage to make because its cause large diminution in authorities income. Government withdraw fast the subsidisation which given to East Malayan states, for illustration sugar. This causes the monetary value of the goods addition. Traders keep the points for long term and sell it once more for a high monetary value. This causes the life of East Malaysians to be more expensive.

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Mention: 1.

2. Media statement by Dr. Hiew King Cheu in Kota Kinabalu on Tuesday, 3rd April 2012

Part 2

( a ) .

Graph 1: Monetary value under perfect competition and monopoly

Graph 2: The industry supply curve is the industry MC curve, which in bend is the amount of the house MC curves.

Graph 3: Monetary value ( Pm ) and end product ( Qm ) for the monopoly.

Under perfect competition, monetary value is determined for the industry and for the house by the intersection of demand and supply, at Pc in graph 1.The absolutely competitory industry is besides the fringy cost ( MC ) curve of the industry as seen in supply curve S in graph 2. Suppose now that the industry is taken over by a individual house and that both costs and demand are ab initio unchanged. It follows that the fringy cost curve remains in the same place ; besides that the demand curve for the absolutely competitory industry now becomes the demand and AR curve for the monopolizer. The fringy gross ( MR ) curve must so lie inside the negatively aslant AR curve. The profit-maximising monetary value for the monopolizer is Pm, matching to end product Qm where MC = MR. Price is higher under monopoly than under perfect competition ( Pm p Pc ) and measure is lower ( Qm ` Qc ) . This unfavorable judgment of monopoly is extra to the fact that, as its noted from Graph 3 end product is non at minimal mean entire cost and monetary value does non equal fringy cost, interrupting the several conditions for productive and allocative efficiency. However, these unfavorable judgments of monopoly may non be every bit strong as they foremost appear. We have already seen that the increased size which underpins monopoly power may give economic systems of graduated table, both proficient and non-technical. Where these economic systems of graduated table are important, with the house now able to travel to a lower short-term mean cost curve and with it a lower fringy cost curve. In graph 1, if economic systems of graduated table were sufficiently big to take down the MC curve to MC, so the profit-maximizing monopoly monetary value Pm and measure Qm would be indistinguishable to those achieved under perfect competition. If economic systems of graduated table were even greater, take downing the MC curve below MC, , so the monopoly monetary value ( Pm ) would be below that of perfect competition and the monopoly end product ( Qm ) would be higher than that of perfect competition.

The monopolies are ever against the public involvement. This is due to some disadvantages of the monopoly which create this state of affairs. The first ground is lower end product and higher monetary value. Firms under perfect competition and monopoly face same state of affairs, but monopolist ever produce higher monetary value at lower measure. The 2nd ground is it is inefficient allocate. When a competitory house and monopolizer have the same cost, the competitory monetary value and end product are non like the public assistance loss under monopoly which is shown by a deadweight loss of consumer and manufacturer. The other ground is it ‘s inefficient productive. The presence of barriers of entry allows the monopolizer to gain unnatural net incomes in long term. Monopolist non operates at the lowest point on the AC curve. Unlike the perfect rivals, monopoly is fruitfully efficient.

Mention: Alan Griffiths and Stuart Wall, 2005. Economicss for Business and Management.

Prentice Hall.



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