ECON 208 Chapter Notes - Chapter 10: Efficient-Market Hypothesis, Electric Power Transmission, Transact
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ECON 208 Full Course Notes
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Everything in chapter 7 = applies to all market structures. Unlike a perfectly competitive firm, a monopolist faces a negatively sloped demand curve. Sales can be increased only if price is reduced, and price can be ^ only if sales are reduced. Tr = p x q when the monopolist charges the same price for all units sold. Ar = tr/q = (p x q)/q = p average revenue. Since the demand curve shows the price of the product, the d curve = the avg revenue curve. The revenue resulting from the sale of one more unit of the product. Since vely sloped, monopolist must reduce price it charges on all units to sell an extra unit. But by reducing the price on all previous units, the firm loses some revenue, so the price received for the extra unit sold is not the firms mr. mr = price lost revenue.