Myhomeworkhelp.com Provides You the Best Homework Help in Measuring Monopoly Power
Monopoly power is considered to be the best available situation for any company. By gaining a solo power over the market, the company is sure to achieve high skies. But experts point out that. For consumers, only a perfect competition can lead to maximum social welfare, as it would control the price hike, quality, etc.
That is why myhomeworkhelp.com experts provide measuring monopoly power homework help, in which they talk about various ways to measure such monopoly power. So let us focus now on the various ways of measuring.
Methods of measuring monopoly power
- Using profit-rate as a measure:
This method of Profit-rate was first used by J.S. Bain. By high profits, economists mean that any business that offers high returns that are sufficient to attract new entrants in the market. Usually, the normal profit size that the company is earning indicates its monopoly power.
In situations of perfect competition, a firm earns normal profit that even a new entrant can earn. But in the case of a monopoly power, it is tougher for a new entrant to earn normal profit. But there will be some level of profits at which the new entrant will find it worth the risk. A measuring monopoly power assignment help expert can be the true guide that you need.
- Concentration ratio as a measure:
This way of measuring monopoly power takes under its consideration the portion of total market sells that are controlled by the largest group of seller.
The concentration ratio works on the assumption that, the big firms will adopt the same price-output policy. And this policy would not differ much from the one that they would have adopted if they were under a common and unified management system.
- Lerner’s measure:
This measure of monopoly power is the one that is highly trusted by our experts providing monopoly power homework help. It is one of the oldest and the most promising measure of monopoly power.
It takes under its consideration the difference between the price charged by the monopolist and his marginal costing in the production. Studying on the same line, Bober came up with the formula 1/E.
The formula 1/E depicts that the degree of monopoly power is inversely related to the elasticity of demand for the commodity.
Apart from this, Lerner gave a formula which is much more widespread, i.e.,
Degree of monopoly power= (P-MC)/P
In the above formula P= price charged by the monopolist.
And MC= his marginal cost.
This is just a small portion of the great boundless knowledge that the measuring monopoly power assignment help expert teaches. If the answer to the above calculation comes ‘0’, then it depicts no monopoly power. And the monopoly power can range between 0-unity.
Myhomeworkhelp.com is the place to go for gaining a better insight on the subject. Opt for monopoly power homework help and let our experts enrich you with the knowledge of economics. Call now!