gs_-17--_Monopolistic_Competition_and_Oligopoly

gs_-17--_Monopolistic_Competition_and_Oligopoly -...

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1 1/22/2010 Econ. 11 - Lecture #17 1 ANNOUNCEMENTS (#1): ± SCHEDULE OF EXAMS (Tentative): o TEST #1 –– DONE! o TEST #2 –Feb. 5 , 2010 o TEST #3 – first week March, 2010 (TBA). o FINAL EXAM – Announced during FINAL EXAM WEEK 1/22/2010 Econ. 11 - Lecture #17 2 Lecture 17: MONOPOLY AND IMPERFECT MARKETS ± MONOPOLY o MONOPOLY EQUILIBRIUM o MONOPOLY & “INEFFICIENCY” o TAXATION AND MONOPOLY o PRICE DISCRIMINATION ± MONOPOLISTIC COMPETITION 1/22/2010 Econ. 11 - Lecture #17 3 MR, MC, AR, AC Quantity The quantity is low. But Q 0 could be higher. PROFIT COST 0 AR AC MC 4 Q 0 MR P 0 The monopoly earns a large profit – Excess of sales over cost.
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2 1/22/2010 Econ. 11 - Lecture #17 4 PROFIT COST 0 MR, MC, AR Quantity MC 4 Q 0 MR P 0 The consumer surplus is smaller. The monopolist extracts it partly and earns a large profit. AC If this were competitive, this point would solve P and Q. 1/22/2010 Econ. 11 - Lecture #17 5 COMPETITION, MONOPOLY AND ECONOMIC EFFICIENCY ± COMPETITIVE EQUILIBRIUM o Price is the lowest possible. [P=MR; MR=MC) o Quantity is the highest possible. o Market participants (buyers & sellers) have the highest welfare possible. o Economically efficient. 1/22/2010 Econ. 11 - Lecture #17 6 COMPETITION, MONOPOLY AND ECONOMIC EFFICIENCY ± MONOPOLY EQUILIBRIUM ± Monopolist has control over the outcome of price and quantity. ± Price is high (P is greater than MR; P>MC).
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This note was uploaded on 04/18/2010 for the course SE 67256 taught by Professor Dr.gerardosicat during the Spring '10 term at University of the Philippines Diliman.

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gs_-17--_Monopolistic_Competition_and_Oligopoly -...

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