Week 3 Discussion: Managerial Economics (Essay Sample)
How do you think a monopoly can successfully erect barriers of production differentiation, strategy, and cost advantages to maximize profit? Discuss your rationale. Make sure you incorporated textbook (Samuelson, W. F., & Marks, S. G. (2015). Managerial economics. Hoboken, NJ: Wiley.) and other academic or professional resources, comprehensively demonstrated analytical and cognitive thinking skills.source..
WEEK 3 DISCUSSION: Managerial Economics
How do you think a monopoly can successfully erect barriers of production differentiation, strategy, and cost advantages to maximize profit? Discuss your rationale.
Monopolies can control price and quality, and this is associated with the downward sloping demand curve and not horizontal. Product differentiation reduces the number of competitors since the monopoly can raise price without immediately losing all the sales (Samuelson & Marks, 2015). Unlike in perfect competition, where it is possible to choose among different firms and their products, it would be costly for the consumers not to rely on monopoly firm’s products and services. The product differentiation may also be associated with customer loyalty as the customers choose the established brands where there are no alternatives, further making the monopoly firm to exercise market power.
The dominant firm or firms tend to create barriers to entry using various strategies that limit competition. One of
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