ECON 101 Lecture Notes - Lecture 14: Marginal Cost, Takers, Natural Monopoly
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ECON 101 Full Course Notes
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Individual firms that have no impact on market price. Firms that have at least some influence on the market price. Market power: the ability of a firm to raise its price above the competitive level. Market with a single supplier of a good. Monopolists know their actions influence market price. Take this into account when deciding how much to produce. Choose price and quantity to maximize profits. In order to maximize profits, a firm should continue to produce as long as the additional revenue from an additional unit of output is greater than the additional cost from an additional unit of output. Keep producing as long as mr > mc. Profits are maximized by producing the quantity at which the marginal cost of the last unit produced is equal to its marginal revenue. For price takers (perfect competition) marginal revenue equals price (mr = p) Can sell all they want at the market price.