Lecture 3

# Lecture 3 - Chapter 12: Monopoly Econ 1: Firm takes price...

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1 Chapter 12: Monopoly Econ 1: Firm takes price as given, chooses how much to produce Chapter 12: What if firm gets to choose the price along with choosing how much to produce? Chapter 12: Monopoly A. Total revenue and marginal revenue Definition: total revenue ± total amount received from selling product Definition: total revenue ± total amount received from selling product P ± price of product Q ± number of units sold PQ ± total revenue Definition: marginal revenue ± amount received from selling one more unit of product

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2 Definition: marginal revenue ± amount received from selling one more unit of product ± PQ   Q or d ±   dQ Firm with downward-sloping demand curve Demand for firm's product 0 2 4 6 8 10 12 14 16 012345 Quantity (Q) Price (P) Example: Firm with downward- sloping demand curve 4 4 7 3 10 2 13 1 P Q Demand for firm's product 0 2 4 6 8 10 12 14 16 Quantity (Q) 4 4 7 3 10 2 13 1 TR P Q Demand for firm's product 0 2 4 6 8 10 12 14 16 Quantity (Q) 4 4 7 3 20 10 2 13 13 1 TR P Q Demand for firm's product 0 2 4 6 8 10 12 14 16 Quantity (Q) 16 4 4 21 7 3 20 10 2 13 13 1 MR TR P Q Demand for firm's product 0 2 4 6 8 10 12 14 16 Quantity (Q)
3 16 4 4 21 7 3 7 20 10 2 13 13 13 1 MR TR P Q Demand for firm's product 0 2 4 6 8 10 12 14 16 012345 Quantity (Q) Price (P) -5 16 4 4 1 21 7 3 7 20 10 2 13 13 13 1 MR TR P Q Demand for firm's product 0 2 4 6 8 10 12 14 16 Quantity (Q) Observation 1: MR is always less than

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## This note was uploaded on 03/21/2009 for the course ECON 2 taught by Professor Kim during the Spring '08 term at UCSD.

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Lecture 3 - Chapter 12: Monopoly Econ 1: Firm takes price...

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