{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Econ 281 Chapter11b

# Econ 281 Chapter11b - Shifts in market demand A shift in...

This preview shows pages 1–13. Sign up to view the full content.

1 Shifts in market demand A shift in market demand will cause the monopolist’s MR curve to shift also This will cause a new equilibrium (MR=MC) This new equilibrium will cause a new price

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
2 Price Quantity D 0 MR 0 Q 0 P 0 MC P 1 Q 1 Here an increase in demand increased monopoly price and quantity
3 An ice cream monopolist with a MC curve of  MC=Q originally faced a demand curve of  P=20-2Q.  Due to an increase in temperature,  demand shifted to P=35-2Q. Calculate the change in price and quantity due to  this shift in demand.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
4 ORIGINALLY: P=20-2Q MR=20-4Q MR=MC 20-4Q=Q 4=Q P=20-2Q P=20-2(4) P=12
5 AFTER DEMAND SHIFT: P=35-2Q MR=35-4Q MR=MC 35-4Q=Q 7=Q P=35-2Q P=35-2(7) P=21

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
6 The shift in demand caused: -An increase in monopoly price of \$9  (\$21-\$12) -An increase in quantity produced of 3  cones (7-4)
7 Shifts in marginal cost A shift in marginal cost will create a new equilibrium (MR=MC) This new equilibrium will cause a new price Increases in cost will always raise price and decrease quantity supplied for a monopolist

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
8 Price Quantity D 0 MR 0 Q 0 P 0 MC P 1 Q 1 An increase in cost increases monopoly price and decreases quantity supplied
9 We saw before how a perfectly competitive  market maximized consumer and producer  surplus Since a monopoly decreases output to  increase prices, a monopoly will normally  create a DEADWEIGHT LOSS:

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
10 MC=S Demand MR Q M P M P C Q C CS with competition: A+B+C PS with competition: D+E A B C D E
11 MC=S Demand MR Q M P M P C Q C A B C D E DWL = C+E CS with monopoly: A PS with monopoly:B+D

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
12
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}