ECON101 Lecture Notes - Lecture 10: Monopoly Price, Marginal Revenue, Price Discrimination

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: Corey Van De Waal

Document Summary

Monopoly price setter de(cid:373)a(cid:374)d for the (cid:373)o(cid:374)opoly"s output is the market demand. To sell a larger output, a monopoly must set a lower price. Total revenue (tr) = the price (p) x quantity sold (q) Marginal revenue (mr) = the change in total revenue that results from a one-unit increase in the quantity sold. For a single-price monopoly, mr < p. For a monopoly, mr < p at each quantity. A single-price (cid:373)o(cid:374)opoly"s mr is related to the elasticity of demand for the good: if demand is elastic, a fall in the price brings an increase in. Tr mr is positive: as the price falls, tr increases, if demand is inelastic, a fall in the price brings a decrease in. Tr mr is negative: as the price falls, tr decreases, if demand is unit elastic, a fall in the price does not change. Tr mr = 0: tr is maximized when mr = 0.