COMM 295 Chapter Notes - Chapter 9: Institute For Operations Research And The Management Sciences, Snob, Natural Monopoly
Document Summary
Always lies below its demand curve because demand curve is downward sloping. Marginal rev of monopoly differs because of downward-sloping demand curve. Competitive rm face horizontal demand curve (can not sell one more unit without reducing. Since monopoly is only rm in the market, q = q so q is used to describe both rm and market output. When monopoly wants to sell another unit, it must drop price where as comp. Rm can sell an extra unit without cutting price ( rm is price taker) The downward slope of monopoly means that it is a price setter but still faces demand that diminishes with price. Lays below a downward-sloping demand curve at every positive quantity. For linear demand, it is a straight line that starts at same point on price axis but has twice the slope and hits x axis at half of where demand curve hits.
