{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

PAM 200 Chapter 11

PAM 200 Chapter 11 - PAM 200 Chapter 11 Monopoly and...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
PAM 200 Chapter 11 Monopoly and monopsony If firm produces quantity at which MR>MC the firm cannot be maximizing its profit because it could increase its output and its profit would go up If firm produces quantity at which MR<MC the firm cannot be maximizing its profit, because it could decrease it output and its profit would go up Thus the only situation at which the monopolist cannot improve its profit by increasing or decreasing output is where marginal revenue equals marginal cost that is if Q* denotes the profit-maximizing output then MR(Q*)=MC(Q*) Profit-maximization condition for a monopolist- condition that says that monopolist maximizes profit by producing a quantity at which marginal revenue equals marginal cost For price taking firm marginal revenue equals market price For a monopolist this is not true MR = P + Q( P/ Q) Indicates that marginal revenue consists of two parts P corresponds to increase in revenue due to higher volume-the marginal units Q( P/ Q) corresponds to decrease in revenue due to the reduced price of the inframarginal units Marginal revenue is less than the price the monopolist can charge to sell that quantity for any quantity greater than 0 Marginal revenue can either be positive or negative o Negative if increased revenue firm gets from selling additional volume is more than offset by the decrease in revenue caused by the reduction in
Image of page 1

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

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern