BUS 3000 Lecture : lec 5.doc

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A monopoly ( single sellers") is the sole producer in an industry. This means that demand for the industry is demand for the monopoly and that the marginal cost and average cost functions of the monopoly are the marginal cost and average cost functions for the industry. A monopoly is not a price taker since a change in industry output changes the price of the commodity for the monopoly. Since price is not constant, marginal revenue is not equal to price for a monopolist. Profit maximization for a monopolist: mr = mc. Profit maximization for the monopolist occurs at the output where marginal cost = Marginal revenue (mc = mr) as we derived earlier for all firms. Deriving marginal revenue from demand: slopemr = 2*sloped for linear demand. We know that marginal revenue = p + qd p/d q but we can also express marginal.

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