File:Imperfect competition after regulation.svg
Summary
Diagram showing a firm in imperfect competition (e.g. a <a href="https://en.wikipedia.org/wiki/monopoly" class="extiw" title="en:monopoly">monopoly</a>) - when price regulation forced it to decrease its price from P to Preg. The <a href="https://en.wikipedia.org/wiki/profit_maximization" class="extiw" title="en:profit maximization">profit maximising</a> firm therefore chooses to expand output from Q to Qreg. Its <a href="https://en.wikipedia.org/wiki/Profit_(economics)" class="extiw" title="en:Profit (economics)">economic profit</a> is reduced, but not removed entirely; for the government's point of view, <a href="https://en.wikipedia.org/wiki/allocative_efficiency" class="extiw" title="en:allocative efficiency">allocative efficiency</a> is achieved. The diagram has been slightly simplified. Technically, the regulation would cause the MR curve to be malformed, but to no particular consequence other than the common sense one of reduced prices. The costs at Q and Qreg are shown as equal merely out of convenience.
Licensing
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File history
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| Date/Time | Thumbnail | Dimensions | User | Comment | |
|---|---|---|---|---|---|
| current | 18:44, 12 January 2017 | | 580 × 400 (4 KB) | 127.0.0.1 (talk) | Diagram showing a firm in imperfect competition (e.g. a <a href="https://en.wikipedia.org/wiki/monopoly" class="extiw" title="en:monopoly">monopoly</a>) - when price regulation forced it to decrease its price from P to P<sub>reg</sub>. The <a href="https://en.wikipedia.org/wiki/profit_maximization" class="extiw" title="en:profit maximization">profit maximising</a> firm therefore chooses to expand output from Q to Q<sub>reg</sub>. Its <a href="https://en.wikipedia.org/wiki/Profit_(economics)" class="extiw" title="en:Profit (economics)">economic profit</a> is reduced, but not removed entirely; for the government's point of view, <a href="https://en.wikipedia.org/wiki/allocative_efficiency" class="extiw" title="en:allocative efficiency">allocative efficiency</a> is achieved. The diagram has been slightly simplified. Technically, the regulation would cause the MR curve to be malformed, but to no particular consequence other than the common sense one of reduced prices. The costs at Q and Q<sub>reg</sub> are shown as equal merely out of convenience. |
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