L6 Monopoly & Social Welfare

L6 Monopoly & Social Welfare - Chapter 9: Monopoly,...

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1 • No class or discussion sections Monday, Jan 19 • First in-class exam on Wednesday, Jan 28 • Exam cover Chapters 7 and 9 • Answers to practice exam will be reviewed in discussion sections between Wednesday, Jan 21 and Monday, Jan 26 Chapter 9: Monopoly, Oligopoly, and Monopolistic Competition A. Total revenue and marginal revenue B. Total cost, marginal cost and fixed cost C. Profit maximization D. Monopoly E. Perfect competition F. Comparison between perfect competition and monopoly Conclusion: monopoly results in a higher price and less output being produced Consumers worse off under monopoly demand demand supply Marginal cost MR P1 Q1 Consumer surplus under monopoly Q2 P2 Consumer surplus under perfect comp Firms better off under monopoly demand demand supply Marginal cost MR P1 Q1 Producer surplus under monopoly Q2 P2 Producer surplus under perfect comp Society worse off under monopoly demand demand supply Marginal cost MR P1 Q1 Total surplus under monopoly Q2 P2 Total surplus under perfect comp
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2 Society worse off under monopoly demand demand supply Marginal cost MR P1 Q1 Deadweight loss under monopoly Q2 P2 Total surplus under perfect comp Adam Smith (1776): An individual producer “neither intends to promote the
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L6 Monopoly & Social Welfare - Chapter 9: Monopoly,...

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