CHAPTER 13
MONOPOLY
The problems in this chapter deal primarily with marginal revenuemarginal cost calculations in
different contexts. For such problems, students’ primary difficulty is to remember that the
marginal revenue concept requires differentiation with respect to
quantity
. Often students choose
to differentiate total revenue with respect to price and then get very confused on how to set this
equal to marginal cost. Of course, it is possible to phrase the monopolist’s problem as one of
choosing a profitmaximizing price, but then the inverse demand function must be used to derive
a marginal cost expression. The other principal focus of some of the problems in this chapter is
consumer’s surplus. Because the computations usually involve linear demand curves, they are
quite straightforward.
Comments on Problems
13.1
A simple marginal revenue–marginal cost and consumer surplus computation.
13.2
An example of the
MR = MC
calculation with three different types of cost curves.
13.3
An example of the
MR = MC
calculation with three different demand and marginal
revenue curves. Illustrates the “inverse elasticity” rule.
13.4
Examines graphically the various possible ways in which shift in demand may affect the
market equilibrium in a monopoly.
13.5
Introduces advertising expenditures as a choice variable for a monopoly. The problem
also asks the student to view market price as the decision variable for the monopoly.
13.6
This problem examines taxation of monopoly output. It shows that some results from
competitive taxincidence theory do not carry over.
13.7
A price discrimination example in which markets are separated by transport costs. The
problem shows how the price differential is constrained by the extent of those costs. Part
d asks students to consider a simple twopart tariff.
13.8
A marginal revenuemarginal cost computation for the case in which monopolist’s costs
exceed those of a perfect competitor. The problem suggests that the social losses from
such increased costs may be of the same order of magnitude as the deadweight loss from
monopolization.
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 Spring '09
 Smith
 Monopoly, Supply And Demand, MR curve

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