ECO 201 Lecture Notes - Lecture 14: Marginal Revenue, Natural Monopoly, Marginal Cost
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The more you produce the less it costs to produce. Single price monopolies charge everyone the same price at all times. Price discriminating monopolies sell different units at different prices for different people. Demand curve for monopolies output is the market demand curve. Marginal revenue = increases in total revenue from selling one more unit. Demand is inelastic when marginal revenue is negative and elastic when marginal revenue is positive. Marginal revenue falls at twice the rate as price. If demand is inelastic, a fall in price brings a decrease in total revenue and marginal revenue is negative. Firm produces the output at which marginal revenue = marginal cost and sets the price to sell that quantity. +never produce an output at which demand is inelastic. +change in profit = marginal revenue minus marginal cost. Competitive firms would be better off if they colluded to produce less and charge more. Single price monopoly: higher price and smaller output.
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