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ECON 2310 (47)
Chapter 17

Chapter17 Intermediate Micro Notes

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Department
Economics
Course
ECON 2310
Professor
Johanna Goertz
Semester
Fall

Description
Chapter 17 Economic NotesMonopoly171 MARKET POWERMarket power When a firm can profitably charge a price that is above its marginal cost A firm that has no competitors at all can charge a price that is substantially above marginal cost Market power occurs in monopoly markets and Oligopoly MarketsOligopoly Market a market with a few but not many sellers In situations with market power economists define a market to include products that are close substitutes for one another and exclude more distant substitutesHow Do Firms Become Monopolists Sometimes government grants a monopoly position to a firm because no other firm fin market profitable because its the first to recognize an opportunity tend to erode over time though or simply by owning all of an essential input172 MONOPOLY PRICING A monopolist will choose the price that maximizes its profit given demandMarginal Revenue for a MonopolistMRPQSlope change PChange Q QMRPQ 11Ed If demand is very elastic the firm doesnt need to reduce its price much to increase salesprice reduction effect is smallMonopoly Profit Maximization Marginal revenue mustmarginal cost at price maximizing quantity If MRMC the monopolist would be better off selling a little more since additional units would bring more rev If MRMC selling a little less would increase profit If a firm has no sunk costs then the profit from shutting down is 0Markup A Measu
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