Lecture 7

Lecture 7 - Upcoming dates to note Exam Wed Jan 30 will...

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1 Upcoming dates to note • Exam Wed Jan 30 will cover through end of Chapter 13 • Items in book but not in lectures, and in lectures but not in book will be included, but most questions will be on material covered in both book and lectures • Practice exam questions will be reviewed in discussion sections Wednesday Jan 23-Tuesday Jan 29 • Special lecture Friday from Sam Dastrup (no professor office hours Friday morning) Chapter 12: Monopoly A. Total revenue and marginal revenue B. Total cost, marginal cost and fixed cost C. Profit maximization D. Comparison between monopoly and perfect competition E. Price discrimination F. Barriers to entry Examples of government-created monopolies (1) government licenses or franchises (Yosemite, taxis) (2) patents and copyrights My book: MC = $20 Price (wholesale) = $60 Princeton Univ. Press has exclusive right to publish book in U.S. Reason for copyright or patent: There were big fixed costs in creating book (say, $300,000) Before book was written, “fixed costs” weren’t fixed. Before book was written, made a guess that would sell 10,000 copies Marginal cost of writing one more book: $300,000 “fixed cost” + 10,000 books x $20 “marginal cost” per book = $500,000
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2 Marginal revenue from one more book: 10,000 books x $60/book = $600,000 Based on this market expectation, looked like a good deal But if price only covered the marginal
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Lecture 7 - Upcoming dates to note Exam Wed Jan 30 will...

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