Principles of Economics- Mankiw (5th) 313

Principles of Economics- Mankiw (5th) 313 - CHAPTER 15 M O...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 15 MONOPOLY 323 revenue is greater than the output effect. In this case, when the firm produces an extra unit of output, the price falls by enough to cause the firm’s total revenue to decline, even though the firm is selling more units. PROFIT MAXIMIZATION Now that we have considered the revenue of a monopoly firm, we are ready to examine how such a firm maximizes profit. Recall from Chapter 1 that one of the Ten Principles of Economics is that rational people think at the margin. This lesson is as true for monopolists as it is for competitive firms. Here we apply the logic of marginal analysis to the monopolist’s problem of deciding how much to produce. Figure 15-4 graphs the demand curve, the marginal-revenue curve, and the cost curves for a monopoly firm. All these curves should seem familiar: The de- mand and marginal-revenue curves are like those in Figure 15-3, and the cost curves are like those we introduced in Chapter 13 and used to analyze competitive firms in Chapter 14. These curves contain all the information we need to determine
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

Ask a homework question - tutors are online