ECON 1 Lecture Notes - Lecture 17: Market Power, W. M. Keck Observatory, Demand Curve

13 views2 pages

Document Summary

Marginal revenue- the change in total revenue (tr) associated with a one unit change in output is less than price (average revenue) for every unit of output except the first. Firms with down sloping demand curves are price makers. As a result any change in quantity produced causes a movement along their respective demand curves and a change in price. The tr test for price elasticity of demand is the basis for the monopolist will never choose a price-quantity combination where price reductions cause total revenue to decrease ( marginal revenue to be negative). They avoid the inelastic segment of its demand curve in favor of some elastic region. The reason is to be in the inelastic region, the monopolist must lower price and increase output. In the inelastic region a lower price means less total revenue (tr) and increased output always means increased total cost (tc), less tr and higher tc yield lower profit.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

Related Questions