ECON 10a Lecture Notes - Lecture 15: Marginal Revenue, Demand Curve, Economic Surplus

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Monopoly: demand curve for a monopoly, market demand curve is the demand curve faced by the monopoly, for the first unit, marginal revenue is equivalent to price. Profit goes up whenever marginal revenue is higher than marginal cost. To maximize profit, firms should produce the q where mr = mc. This is the quantity the monopoly wants to sell. Assuming no externalities, the socially efficient quantity is where mc, or. Msc meets d, or msb: however, a monopoly will never meet the socially efficient quantity because the monopoly will always follow the intersection of mr and mc. Antitrust policy: in history, monopolies have been broken up into smaller companies, ex: us steel, bell company, depends on current government/politicians in power. Lower trade barriers: force domestic firms to compete with foreign firms. Ex: economies of scale that never stop, ac is constantly falling but never goes below .

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