ECON 1050 Chapter 13: Economics-1 (1) (dragged) 1

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For a monopoly firm to determine the quantity it sells, it must choose the appropriate price. Many firms price discriminate, but not all of them are monopoly firms. A monopoly is a price setter, not a price taker like a firm in perfect competition. The reason is that the demand for the monopoly"s output is the market demand. To sell a larger output, a monopoly must set a lower price. Total revenue, tr, is the price, p, multiplied by the quantity sold, q. Marginal revenue, mr, is the change in total revenue that results from a one-unit increase in the q sold. For a single-price monopoly, marginal revenue is less than price at each level of output. Figure 13. 2 illustrates the relationship between the price and marginal revenue and derives the marginal revenue curve. It loses of total revenue of the 2 units it was was selling at each.

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