{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Lecture 4

# Lecture 4 - Chapter 12 Monopoly A Total revenue and...

This preview shows pages 1–3. Sign up to view the full content.

1 Chapter 12: Monopoly A. Total revenue and marginal revenue marginal revenue = added revenue from selling one more unit B. Total cost, marginal cost and fixed cost marginal cost = added cost from producing one more unit Chapter 12: Monopoly A. Total revenue and marginal revenue B. Total cost, marginal cost and fixed cost C. Profit maximization Proposition: any firm maximizes profit by setting marginal revenue equal to marginal cost First method of proof: calculus TR ± total revenue TC ± total cost TR " TC ± profit Firm maximizes profit by finding derivative of profit with respect to Q and setting it to zero d ± TR " TC   dQ ± 0 requires d ± TR   dQ ± d ± TC   dQ or marginal revenue ± marginal cost

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

View Full Document
2 Second method of proof: intuition Suppose the firm wasn’t following our advice, and operated at a level where MR > MC Then if it produced one more unit: • its revenues would go up by MR • its costs would go up by MC • if MR > MC, its revenues would go up by more than its costs if it produced one more unit • Conclusion: if MR > MC, firm can increase
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 5

Lecture 4 - Chapter 12 Monopoly A Total revenue and...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online