B200.F09.W09.Mono.Clsnts

B200.F09.W09.Mono.Clsnts - BUAD 200 Fall 2009 Week 09:...

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BUAD 200 Fall 2009 Week 09: October 19-21, 2009 Classnotes Monopoly = Price Searcher (Chapter 14) 1. All firms that are not in perfectly competitive markets face a downward sloping demand curve. We can then use the (monopoly model = Price Searcher) to represent the pricing behavior and production decision of all other firms. 2. If demand is downward sloping, marginal revenue is less then Price. Demand Total Revenue Marginal Revenue Price Qty $10 1 $ 10 $10 $ 9 2 $ 18 $ 8 $ 8 3 $ 24 $ 6 $ 7 4 $ 28 $ 4 $ 6 5 $ 30 $ 2 The marginal revenue (addition to revenue from selling one more unit) is less than price, because to sell more, you must lower the price to all buyers. 3. The degree of competition facing the firm is reflected by the elasticity of demand. With fewer competitors the demand is more inelastic (steeper), with more competitors it is more elastic (flatter) 4. The monopoly model : downward sloping demand curve A. The profit maximizing output is where MR = MC , just like for the price taker firm. B. The Price is above MR, and therefore, the price is above marginal cost.
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B200.F09.W09.Mono.Clsnts - BUAD 200 Fall 2009 Week 09:...

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