ECON-2000 Lecture Notes - Lecture 11: Demand Curve, Strategic Dominance, Decision-Making
34 views2 pages
Document Summary
Chapter 11 monopoly is the power to raise price above marginal cost without fear that other firms will enter the market: a monopoly, a firm with market power. How a firm uses market power to maximize profit: marginal revenue, mr, the change in total revenue from selling an additional unit, marginal cost, mc, the change in total cost from producing an additional unit. To maximize profit, a firm increases output until mr = mc: figure 11. 1 pg. 223 how a monopolist maximizes profit: figure 11. 5 pg. 226 competition maximizes total surplus, monopolies do not maximize total surplus. Economies of scale and the regulation of monopoly: a natural monopoly, said to exist when a single firm can supply the entire market at a lower cost than two or more firms, ex. Your cable company or a subway: figure 11. 6 pg. 230 a monopoly with large economies of scale can have a lower price than competitive firms: figure 11. 7 pg.
Get access
Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers
Related Documents
Related Questions
(1) | (2) | (3) | (4) | (5) | (6) | (7) |
Output (Q) | Price per Unit (P) | Total Revenue (TR) | Marginal Revenue (MR) | Total Cost (TC) | Average Total Cost (ATC) | Marginal Cost (MC) |
0 | $10 | $8 | ||||
1 | 9 | 11 | ||||
2 | 8 | 12 | ||||
3 | 7 | 15 | ||||
4 | 6 | 24 | ||||
5 | 5 | 35 | ||||
6 | 4 | 48 |
Does this data represent the revenues and costs of a perfect competitive firm or a firm with some degree of âmonopoly powerâ? ______________________
How do you know? ________________________________________________
Fill in the blanks in the table above.
How much output should this firm produce to maximize itâs profit? _____units. What price should this firm charge for its product? $_____ per unit.
This choice of output and price will lead to an economic profit = $______