# Lecture 8 - Monopoly Mercedes Miranda BE530 1 1....

This preview shows pages 1–9. Sign up to view the full content.

Mercedes Miranda BE530 1 Monopoly

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
2 1. Monopoly Versus Perfect Competition Competitive firms are price takers , Monopoly firms are price makers . Firm is considered a monopoly if … Sole seller of its product. No close substitutes.
3 Monopoly Is the sole producer Faces a downward-sloping demand curve Is a price maker Reduces price to increase sales

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
4 Competitive Firm Is one of many producers Is a price taker Faces a horizontal demand curve Sells as much or as little at same price
5 Fig. 1 Demand Curves for Competitive & Monopoly Firms Quantity of Output Demand (a) A Competitive Firm’s Demand Curve (b) A Monopolist’s Demand Curve 0 Price Quantity of Output 0 Price Demand

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
6 A Monopoly’s Revenue Total Revenue P × Q = R Average Revenue R/Q = P Marginal Revenue R/ Q = MR A monopolist’s marginal revenue is always less than the price of its good. The demand curve is downward sloping. When a monopoly drops the price to sell one more unit, the revenue received from previously sold units also decreases.
7 A Monopoly’s Marginal Revenue When a monopoly amount it sells, two effects on total revenue ( P × Q ). The output effect —more output is sold, so Q is higher. The price effect —price falls, so P is lower.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
8 Fig. 2 Demand & Marginal-Revenue Curves for a Monopoly Quantity of Water Price \$11 10 9 8 7 6 5 4 3 2 1 0 –1 –2 –3 –4 Demand (average revenue) Marginal revenue 1 2 3 4 5 6 7 8
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern