# Ch10 - Chapter10 MarketPower:Monopolyand Monopsony 1...

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1 Chapter 10 Market Power: Monopoly and  Monopsony

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2 Topics to be Discussed Sections 10.1 – 10.4 Monopoly Sources of Monopoly Power The Social Costs
3 Review of Perfect Competition Q P Market D S Q 0 P 0 Q P Individual Firm P 0 D = MR = P q 0 LRAC LMC

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4 Monopoly Monopoly 1. One seller - many buyers 2. One product (no good substitutes) 3. Barriers to entry 4. Price Maker: has “market power”
5 Monopoly Output 1 2 3 4 5 6 7 0 1 2 3 \$ per unit of output 4 5 6 7 Demand No supply curve Chooses a point on  demand curve π  max at Q where  MR=MC Demand Function: Q (P) Inverse Demand Function: P (Q)

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6 Monopoly Max Profit: MC MR MC MR Q Q C Q R Q = = - = - = 0 ) ( ' ) ( ) ( ) ( π
7 Average and Marginal Revenue AR = TR/Q = P MR = ∆ TR/∆Q < P Recall, TR = P  Q,  but P is a function of Q MR = TR’ = P   x 1 + Q  P’ MR = P + Q  P’   MR < P

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8 Ex: Demand, P = 6 - Q Output 1 2 3 4 5 6 7 0 1 2 3 \$ per unit of
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## This note was uploaded on 09/25/2010 for the course ECON Econ 2296 taught by Professor W.graygiovannetti during the Fall '10 term at Langara.

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Ch10 - Chapter10 MarketPower:Monopolyand Monopsony 1...

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