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ECON 208 CH10 Monopoly, Cartels And Price Discrimination.pdf

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McGill University
Economics (Arts)
ECON 208
Michel Lapointe

ECON 208 Introduction To Microeconomics Introduction To Microeconomics Chapter 10 Monopoly Cartels And Price Discrimination Chapter 10 Monopoly Cartels And Price Discrimination Monopoly a market containing a single firmMonopolist a firm that is the only seller in a marketThis market structure allows the maximum exercise of market power on part of the firmA monopolist faces a downward sloping demand curveThe monopolist is the sole producer of the product the demand curve it faces is the market demand curveSingle price for all unitsTotal RevenuepQAverage RevenuepMarginal RevenuepTo increase its sales the revenue must decrease the price for the productHence the MR curve is below the AR curveDemand is elastic when MR0 Demand is inelastic when MR0The monopolist will always produce on the elastic portion of its demand curveShort Run Profit Maximization
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