Log in
HomeClass Notes1,200,000CA670,000

ECON 101 Lecture Notes - Lecture 10: Marginal Cost, Transact, Creative Destruction

69 views8 pages
ceruleanmule193
18 Apr 2018
School
UBC Okanagan, UBC OK
Department
Economics
Course
ECON 101
Professor
Noriko Ozawa

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Unlike a perfectly competitive firm, a monopolist faces a negatively sloped demand curve. A monopolist"s total revenue, average revenue and marginal revenue are computed the same way. However, because a monopolist"s demand curve is negatively sloped, the monopolist. Because as the monopolist reduces the price of all of its units, it loses some revenue. must reduce the price of all units to sell one additional unit. The mr resulting from the sale of an extra unit is less than the price that the monopolist receives for that unit. The monopolist"s marginal revenue is less than the price at which it sells its output. Because of this, the monopolist"s mr curve is below its demand curve. The loss of revenue is the amount of the price reduction by the number of units. The gain in revenue is given by the amount of new units sold the new price. The net change is the difference between these two. already being sold.

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers

Related Questions

Suppose a monopolist faces a demand curve for its output of P = 300−Q. This means that the marginal revenue curve of the monopolist is M R = 300 − 2Q. Assume that the marginal cost of production is constant and equal to $40.

a) Write down an expression for the monopolists profit, as a function of the quantity of output it produces.

b) If the monopolist must charge the same price for all units of output that it sells (that is, if the monopolist is a single price monopolist), what level of output will maximise the monopolists profit? What price will the monopolist charge? What is its level of profit?

c) If this were a competitive market instead of a monopoly, what level of output would be produced and what price would be charged? What is the level of profit for firms if it were perfectly competitive?

d) Draw a diagram of demand, marginal revenue, and marginal cost that illustrates your answer to part b). From this work out consumer surplus and producer surplus.

e) Draw the same diagram but for your answer to c), the case of the competitive market. From this work out consumer surplus and producer surplus. How much deadweight loss is there from the monopoly? Why?

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its

a. Average Revenue (AR) is less than the price of the product.

b. Average Revenue (AR) is less than Marginal Revenue (MR).

c. Marginal Revenue (MR) is less than the price of the product.

d. Marginal Revenue (MR) is greater than the price of the product.

Which of the following statements about marginal revenue is true?

a. As the price a monopolist charges per unit decreases, the marginal revenue (MR) increases because of the additional unit sold.

b. The slope of the marginal revenue (MR) curve is always positive.

c. Marginal revenue (MR) is the same as average revenue.

d. Marginal revenue (MR) is always less than the price.