econ111_lecture13 - Econ 111 Microeconomics Spring 2009...

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1 Econ 111 Microeconomics Spring 2009 Lecture 13 Chapter 10: Market Power: Monopoly and Monopsony (1) Heiwai Tang
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2 Agenda Monopoly Monopoly profit maximization Monopoly pricing Demand shifts in a monopolistic market Multi-product monopoly
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3 Review of Perfect Competition P = LRMC = LRAC (zero profit) Large number of buyers and sellers Homogenous product Perfect information Each firm is a price taker
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4 Monopolist A monopolist is a single firm supplying goods or services in the market It has complete control over the amount produced for sale A monopolist controls price but must respond to the demand conditions As in a perfectly competitive market, profits would be maximized at the level of output where MR = MC Entry is not free
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5 The monopolist’s average revenue , price received per unit sold, is the market demand curve : P(Q)Q / Q = P(Q) Monopolist also needs to find marginal revenue Marginal revenue = change in revenue resulting from a unit change in output Marginal revenue: d[P(Q)Q] / dQ = P(Q) + Q dP(Q)/dQ < P(Q) <0
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6 Q 1 2 3 4 5 6 7 0 1 2 3 $ per unit of output 4 5 6 7 Average Revenue (= Demand Curve) Marginal Revenue
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This note was uploaded on 10/11/2009 for the course ACCT 101+ acct 101+ taught by Professor Various during the Fall '09 term at HKUST.

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econ111_lecture13 - Econ 111 Microeconomics Spring 2009...

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