Econ11Fall2007NotesForLecture_23Nov28

Econ11Fall2007NotesForLecture_23Nov28 - Lecture XXII Notes:...

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Lecture XXII Notes: November 28, 2007 Problem Set Due I. The Supply Response by a Monopolist II. Menagerie of Maximizing Monopolists - Economic Zoo III. Monopolistic Competition - the Market For Style IV. Contrasting Monopoly & Monopolistic Competition I. Supply Response by a Monopolist A. Demand shifts - shift marginal revenue Monopolists have a supply response; no supply curve B. A specific tax is levied - shift cost curves 1. Note that taxing monopolists raises welfare loss. In the diagram below, the monopolist begins producing Q* at price P* and average cost AC*. 2. A specific tax shifts the AC and MC curve up. Output falls to Q’ and price rises to P’, which is less than the amount of the tax so monopoly profit falls. But output falls further below optimal output at Q Optimal and hence welfare loss of monopoly is even larger than before the tax. MC GrossOfTax $/Q MC S AC GrossOfTax AC S D MR Q’ Q* Q Optimal
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II. Menagerie of Maximizing Monopolists - Economic Zoo A. Monopolis Ordinaris - Short Run
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This note was uploaded on 04/18/2008 for the course ECON 011 taught by Professor Yezer during the Fall '07 term at GWU.

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Econ11Fall2007NotesForLecture_23Nov28 - Lecture XXII Notes:...

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