ECO100Y1 Lecture Notes - Marginal Cost, Discounts And Allowances, Price Discrimination

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10 Feb 2014
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Topic 9 monopoly (week night nov 10th - nov 15th) Outline: definition, mr < p (dd, profit-maximizing output & price, contrived scarcity : when competitive industry is monopolized, price discrimination, why is monopoly bad, natural monopoly & regulation of a natural monopoly. - single seller of product with no close substitutes; - e. g. post office (legal monopoly on first class mail); patents. - in monopoly, marginal revenue is always smaller than price. Because monopolists face a downward-sloping demand unlike perfectly competitive firms face horizontal demand. The output effect: more output is sold, so q is higher; The price effect: the price falls, so p is lower. Firms face a horizontal demand curve, and the firm is able to sell any quantity it likes in a constant price. Thus there is no price effect on individual firms in perfect competition. which is always smaller than simply p1.

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