ECON 1B03 Lecture Notes - Lecture 9: Monopoly Profit, Natural Monopoly, Monopolistic Competition

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ECON 1B03 Full Course Notes
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ECON 1B03 Full Course Notes
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Monopoly one seller of a product, whose product does not have close substitutes and is a firm price setter. Monopoly q and p decisions: the monopolies demand curve is the market demand curve downward sloping, change in total revenue is the price of that good minus the amount that price had to be reduced. Competitive equilibrium (cid:373)a(cid:454)i(cid:373)izes cs a(cid:374)d ps a(cid:374)d so(cid:272)iet(cid:455)"s (cid:449)elfare is (cid:373)a(cid:454)i(cid:373)ized (cid:449)hi(cid:272)h is the so(cid:272)iall(cid:455) efficient level (p = mc) A monopolist produces less than the socially efficient quantity of output and charges a higher price (p > The market supply curve is equal to a monopolies marginal cost. Mr is halfway between the y-axis and the demand curve (q intercept) A monopoly produces where mr = mc so, 50 6q = 8 + q q = 6. Substitute into demand (make sure it is demand): Dwl = (32 14) (10. 5 6)/2 = . 50. Ps = (6) (32 14) + (6) (14-8)/2 = .

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