ECN 100B Study Guide - Final Guide: Takers, Federal Trade Commission Act Of 1914, Network Effect
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Market power: ability of seller or buyer to affect price of good. Pure monopoly: in many markets, only a few firms compete with each other. Market power: the ability of a seller or buyer to affect the price of a good. We then set marginal revenue equal to marginal cost: Mc = p + p(1/ ed) = (p mc)/p = -1/ ed. In order to maximize profit, the firm will produce at the point where the elasticity of demand is exactly -1. Changes in output with no change in price. Changes in both price and output (common) Market with several firms: suppose that there are 4 firms producing toothbrushes, market demand curve q = The firm has monopoly power it can charge a price higher than the marginal cost. Source of monopoly power: the less elastic its demand curve, the more monopoly power a firm has, three factors determine firm"s elasticity of demand:
