Lecture+19 - Announcements HW on Ch8 due tonight. It is...

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Announcements HW on Ch8 due tonight. It is long so give yourself time. HW on Ch9 due on THURSDAY at 11:45pm. It is also long. 1 of 38
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2 of 38 Monopoly and the Supply Curve Note 1: A monopoly firm has no supply curve that is independent of the demand curve for its product. A monopolist sets both price and quantity, and the amount of output that it supplies depends on both its marginal cost curve and the demand curve that it faces.
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The Sad Monopolist Note 2: monopolists are NOT guaranteed to make a profit. A monopolist can incur short-run losses, and can be force to shut down in the SR, depending on where the SR cost curves sit. As with perfect competition, the monopolist should produce in the SR if P AVC but should shut down if P<AVC. Think if you opened a BBQ hamster shop on campus. You would have a monopoly, but you probably would not make a profit. 3 of 38
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4 of 38 PRICE AND OUTPUT DECISIONS IN PURE MONOPOLY MARKETS The Negative Profit Monopolist Price and Output Choice for a Monopolist Suffering Losses in the Short Run If a firm can reduce its losses by operating in the short run, it will do so.
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5 of 38 The Zero Profit Monopolist Q D MR ATC P P m Q m
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Note 3: Just saying “find the quantity such that MC=MR, and that will be your profit maximizing level of output” is not very helpful. It is a true rule (in the sense that you “should” do it), but the theory will not tell you HOW to go out and maximize profits. It is very difficult to figure out where the MC and demand curves actually are. 6 of 38
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This note was uploaded on 08/30/2011 for the course ART 3514 taught by Professor Dhbannan during the Summer '03 term at Virginia Tech.

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Lecture+19 - Announcements HW on Ch8 due tonight. It is...

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