Econ11Fall2007NotesForLecture_22Nov26

Econ11Fall2007NotesForLecture_22Nov26 - Lecture XXI Notes...

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Lecture XXI Notes For November 26, 2007 Instructions for makeup final posted on blackboard I. Four Different Forms of Market Organization II. Maximizing Monopoly Profit on a Total Diagram III. Monopoly Profit on Average - Marginal Diagram I. Four Different Forms of Market Organization Type of Industry # Firms Entry Cost Product Type Perfect Comp Many Low Homogenous Monopoly One Very High Different Oligopoly Few High Homogenous Monopolistic Comp Many Low Different II. Maximize Monopoly Profit on a Total Diagram A. Total cost curves have the usual shape B. Total revenue is concave (P falls as Q rises) C. In the long run, choose output to maximize profit where TR is parallel to TC L , i.e. slopes of curves are equal 1. Maximize profit where MR = MC! Golden Rule $ TC L TR TR* P * TR = max TC* MR = 0 MR=MC $/Q Q* P max Output
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III. Max Monopoly Profit on Average - Marginal Diagram A. Average & marginal cost curves have usual shape B. Demand curve gives average revenue = P C. Marginal revenue curve below demand curve MR = 0 when TR maximum, Elasticity = -1
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