lecture-notes-lecture-10-market-power-monopoly-and-monopsony.pdf - lOMoARcPSD|1675695 Lecture notes lecture 10 Market power monopoly and monopsony

Lecture-notes-lecture-10-market-power-monopoly-and-monopsony.pdf

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Lecture notes, lecture 10 - Market power: monopoly and monopsony Microeconomics (Sharif University of Technology) Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Market Power: Monopoly and Monopsony Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 2 Topics to be Discussed ° Monopoly ° Monopoly Power ° Sources of Monopoly Power ° The Social Costs of Monopoly Power Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 3 Topics to be Discussed ° Monopsony ° Monopsony Power ° Limiting Market Power: The Antitrust Laws Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 4 Perfect Competition ° Review of Perfect Competition ± P = LMC = LRAC ± Normal profits or zero economic profits in the long run ± Large number of buyers and sellers ± Homogenous product ± Perfect information ± Firm is a price taker Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Perfect Competition Q Q P P Market Individual Firm D S Q 0 P 0 P 0 D = MR = P q 0 LRAC LMC Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 6 Monopoly ° Monopoly 1) One seller - many buyers 2) One product (no good substitutes) 3) Barriers to entry Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 7 Monopoly ° The monopolist is the supply-side of the market and has complete control over the amount offered for sale. ° Profits will be maximized at the level of output where marginal revenue equals marginal cost. Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 8 Monopoly ° Finding Marginal Revenue ± As the sole producer, the monopolist works with the market demand to determine output and price. ± Assume a firm with demand: ² P = 6 - Q Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 9 Total, Marginal, and Average Revenue $6 0 $0 --- --- 5 1 5 $5 $5 4 2 8 3 4 3 3 9 1 3 2 4 8 -1 2 1 5 5 -3 1 Total Marginal Average Price Quantity Revenue Revenue Revenue P Q R MR AR Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 10 Average and Marginal Revenue Output 0 1 2 3 $ per unit of output 1 2 3 4 5 6 7 4 5 6 7 Average Revenue (Demand) Marginal Revenue Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 11 Monopoly ° Observations 1) To increase sales the price must fall 2) MR < P 3) Compared to perfect competition ² No change in price to change sales ² MR = P Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 12 Monopoly ° Monopolist s Output Decision 1) Profits maximized at the output level where MR = MC 2)
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