1. Unlike a perfectly competitive firm, a monopolist faces a negatively
sloped demand curve
2. Average revenue: TR=p*Q , AR= TR/Q= p*Q/Q=p
3. Marginal revenue: MR=∆TR/∆Q
The monopolist’s marginal revenue is less than the price at which it
sells its output. Thus the monopolist’s MR curve is below its demand
4. Short-run profit maximization
Rule1: the firm should not produce at all unless price (average
revenue) exceed average variable cost
Rule 2: if the firm does produce, it should produce a level of output
such that marginal revenue equals marginal cost.
Nothing guarantees that a monopolist will make positive profits in the
short run, but if it suffers persistent losses, it will eventually go out of
5. Supply curve for monopolist
A monopolist does not have a supply curve because it is not a price
taker; it chooses its profit-maximizing price-quantity combination from
among the possible combinations on the market demand curve
6. Competition and monopoly compared
A perfectly competitive industry produces a level of output such that
price equals marginal cost. A monopolist produces a lower level of
output, with price exceeding marginal cost.
A monopolist restricts output below the competitive level and thus
reduces the amount of economic surplus generated in the market. The
monopolist therefore creates an inefficient market outcome.
7. If monopoly profits are to persist in the long run, the entry of new firms
into the industry must be prevented.
8. Entry barrier: any barrier to the entry of new firms into an industry. An
entry barrier may be natural or created.
Eg. Barriers to entry do not include
b) union pickets.
d) economies of scale.
9. Monopoly is a market structure in which an entire industry is supplied
by a single firm. The monopolist’s own demand curve is identical to the
market demand curve for the product (downsloping).
In a perfectly competitive industry firms accept the market price as
given, so the firm’s demand curve is perfectly elastic.
10.Nature monopoly: an industry characterized by economies of scale
sufficiently large that only one firm can cover its costs white producing
at its minimum efficient scale.
11.In competitive industries, profits attract entry, and entry erodes profits.
In monopolized industries, positive profits can persist as long as there
are effective entry barriers.
12.A single-price monopolist that maximizes profits will produce at the
output where MR=MC. In the long run, a perfectly competitive firm
(and industry) produces a level of output such that all are true. The
monopolist produces a level of output such that price > marginal cost.
13.The profits that a monopoly earns may be positive (P>ATC), zero
(P=ATC) or negative (PATC)
14.For the monopolist, equilibrium output is such that price is greater than
15.A monopolist’s entry barriers are often circumvented by the innovation
of production processes and the development of new goods and
services. Such innovation explains why monopolies rarely persist over
2 long periods, except those that are protected through government
charter or regulation.
16.Cartel: an organization of producers who agree to act as a single seller
in order to maximize joint profits. (形形形形形形形 MR=MC 的利资最大化准形)
Cartels tend to be unstable because of the incentives for individual
firms to violate the output restrictions needed to sustain the joint-
profit-maximizing (monopoly ) price.
Any one farmer is better off if that farmer cheats because they can sell
at the cartel price which is higher than the competitive price. However
if all farmers cheat all will be worse off than if they had joined the
cartel, restricted output, and stuck to the monopoly output
形形形 形cartel形 由一系列生资资似资品的独立企资所资成的资资，集体行资的生资
17.Cartels agree to restrict industry output to the level that maximizes
their joint profits (where the industry’s marginal cost is equal to the
industry’s marginal revenue)
18.The incentive for firms to form a cartel lies in the cartel’s ability to
19.The profit-maximizing cartelization of a competitive industry will
reduce output and raise price from the perfectly competitive levels.
20.If price differences reflect cost differences, they are not discriminatory.
When price differences are based on different buyers’ valuations of the
same product, they are discriminatory.
21.Price discrimination: the sale by one firm of different units of a
commodity at two or more different prices for reasons not associated
with differences in cost.
价格歧资是一种重要的资断定价行资，是资断企资通资 差差差差来 资取超资利资的一种
Eg 1. A perfect price-discriminating monopoly will be
a) as efficient as a single-price monopoly.
b) as efficient as a perfectly competitive industry.
c) more efficient than a single-price monopoly, but less efficient than a
perfectly competitive industry.
3 d) less efficient than a single-price monopoly.
Eg2. When perfect price discrimination occurs, which one of the
following statements is false ?
a) The firm captures consumer surplus.
b) Buyers cannot resell the product.
c) Efficiency is worse than with single-price monopoly.
d) The firm can distinguish between buyers.
Eg3. In order for a monopolist to be able to practice price
a) the monopolist must be able to segment the market.
b) the monopolist must be able to shrink output.
c) the monopolist must have declining average variables costs of
d) the monopolist must have different marginal costs of production for
different output levels.
Eg4. A monopoly has economies of scope if
a) average total cost declines as output increases.
b) total profit declines as output increases.
c) average total cost declines as the firm's scale increases.
d) average total cost declines as the number of different goods
4 C、范资资资资资生资不同种资资品(包 括品种与资格 )资得的资资性，资模资资
形形形形形形形形是指随着资量的增加，企资的资 期平均成本 形形形
22.Any firm that faces a downward-sloping demand curve can increase its
profits if it is able to charge different price for different units of its
23.When is price discrimination possible?
Identification of consumers’ different valuations
No arbitra利 )套
24.Different forms of price discrimination
Price discrimination among units of output
Price discrimination among market segments(形形 形 形)
A firm with market power that can identify distinct market
segments will maximize its profits by charging higher prices in
those segments with less elastic demand
Price discrimination is easier for services than for tangible goods
because for most services the firms transact directly with the
customer and thus can more easily prevent arbitrage
Hurdle pricing exists when firms create an obstacle that consumers
must overcome in order to get a lower price. Consumers then
assign themselves to the various market segments- those who
don’t want to jump the hurdle and are willing to pay the high price,
and those who choose to jump the hurdle in order to benefit from
the low price.
5 25.The consequences of price discrimination
Price discrimination and firm profits
For any given level of output, the most profitable system of
discriminatory prices will always provide higher profits to the firm
than the profit-maximizing single price.
Price discrimination and output
A monopolist that price discriminates among units will produce
more output than will a single-price monopolist.
If price discrimination leads the firm to increase total output, the
total economic surplus generated in the market will increase, and
the outcome will be more efficient.
Price discrimination and consumer welfare
There is no general relationship between price discrimination and
consumer welfare. Price discrimination usually makes some
consumers better off and other consumers worse off.