A market structure known as a monopoly occurs when a single vendor controls the whole market. A monopolist can set the price of its good or service at a level that optimizes its profit because there isn’t any competition. But the issue of whether a monopoly can turn a profit in the short term still exists. A monopoly can indeed turn a profit in the short term. A monopolist can control prices and output, which enables it to make large profits right away. A monopolist can make a profit by charging a price that is more than its marginal cost in the short term.
However, the earnings of current businesses may be impacted by the admission of new enterprises into a market that is monopolistically competitive. The market share of established companies declines as a result of increased competition brought on by new businesses entering the market. As a result, established businesses see a decline in profits as a result of having to lower their pricing in order to remain competitive.
A monopolistically competitive market is made more competitive by the entry of new businesses, which benefits consumers. The increasing competition results in more innovation, higher quality, and reduced prices. There is a greater selection of products available for consumers to pick from as a result of the new firms’ introduction of new products.
For a variety of reasons, new businesses enter monopolistically competitive markets. The possibility of making money is one factor. In a monopolistically competitive market, the possibility of financial gains encourages the entry of new businesses. In addition, new businesses may open in order to market fresh goods, enhance current ones, or satisfy unmet consumer demands.
A monopolistic competitor must take the trade-off between price and quantity into account when determining the quantity of output that will maximize profits. A monopolistic rival may opt for a lower output quantity and a higher price or a bigger output quantity and a cheaper price. The amount of output that maximizes profits is produced when marginal revenue and marginal cost are equal.
In conclusion, a monopoly’s ability to control prices and output allows it to generate profits in the short term. However, the earnings of current businesses may be impacted by the admission of new enterprises into a market that is monopolistically competitive. Lower pricing, higher quality, and innovation are all benefits for customers as a result of the increasing competition. In monopolistically competitive markets, new businesses enter to take advantage of unmet consumer requirements or to make money. A monopolistic competitor must take the trade-off between price and quantity into account when determining the quantity of output that will maximize profits.