Lecture 9

Lecture 9 - Exam details Upcoming dates of note Tuesday Jan...

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1 Upcoming dates of note • Tuesday Jan 29: extra office hours 1:30- 2:30 in Seq 231 • Wed Jan 30: exam 9:00-9:50 a.m. • Wed Jan 30 and Fri Feb 1: class will meet but discussion sections will not Exam details • Format exactly like practice exam (18 multiple choice, 3 calculation or graph questions) • Cover Chapters 5, 12, and 13 • No one can leave room unless exam is finished • No one can start exam after some have been turned in Chapter 13: Monopolistic Competition and Oligopoly A. Monopolistic competition B. Game theory C. Oligopoly Two traditional models of oligopoly (1) kinked demand curve (2) Dominant firm oligopoly Dominant Firm Oligopoly –One large firm has a significant cost advantage over many other, smaller competing firms. –The large firm operates as a monopoly, setting its price and output to maximize its profit. –The small firms act as perfect competitors, taking as given the market price set by the dominant firm. –Figure 13.12 shows10 small firms in part (a). The demand curve, D , is the market demand and the supply curve S 10 is the supply of the 10 small firms.
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2 –At a price of $1.50, the 10 small firms produce the quantity demanded. At this price, the large firm would sell nothing. –But if the price was $1.00, the 10 small firms would supply only half the market, leaving the rest to the large firm. –The demand curve for the large firm’s output is the curve XD on the right. –The large firm can set the price and receives a marginal revenue that is less than price along the curve MR . –The large firm maximizes profit by setting MR = MC . Let’s suppose that the marginal cost curve is MC in the figure.
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3 –The profit-maximizing quantity for the large firm is 10 units. The price charged is $1.00.
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Lecture 9 - Exam details Upcoming dates of note Tuesday Jan...

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