Class Notes (1,100,000)
CA (630,000)
UTSG (50,000)
ECO (2,000)
ECO101H1 (700)
Lecture 17

Lecture 17-Economic Profit of Monopolist


Department
Economics
Course Code
ECO101H1
Professor
Jack Carr
Lecture
17

This preview shows pages 1-2. to view the full 6 pages of the document.
Tuesday, November 17th, 2009.
Economic Profit of Monopolist
P > ATC Æ Profit
P = ATC Æ Zero Profit
P < ATC Æ Loss
At Qm, P > ATC => Economic Profits
Digression
0DUNHW66VXPRIILUPV¶VVVFKHGXOHV
VXPRIILUPV¶PFVFKHGXOHV
= MC for industry as a whole
= MC of monopolist
Pm
DD
Qm
MC
MR
ATC
Economic
profit earned
by monopolist
SS
Q
P
DD
www.notesolution.com

Only pages 1-2 are available for preview. Some parts have been intentionally blurred.

CONTRIVED SCARCITY: A competitive Industry is Monopolized
Results: RXWSXWLVUHGXFHGµFRQWULYHGVFDUFLW\´
(2) price increases
A Perfectly Competitive Industry is Monopolized
Government Policy Towards New Drugs
Objective: 1) Encourage research and development
2) Protect consumers from monopoly prices
Policy: Grant patent protection (monopoly), but for limited period of time.
Period of Patent Protection: Consumers Pay Monopoly Price (PM)
PM
QM
QC
MR
PC
SS = MC
PM
DD
QM
QC
PC
MC [=SS in Perfect Competition]
MR
www.notesolution.com
You're Reading a Preview

Unlock to view full version