Chapter 15 - DECREASE PRODUTION I.A.1.a If marginal cost is...

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Outline Saturday, October 16, 2010 12:41 PM I. The Key Difference between a Monopolist and a Perfect Competitor I.A. Takes into account that its output decision can affect price; its marginal revenue is not its price. I.A. If I increase production, my price will fall. Be careful how much I increase production. I. A Model of Monopoly I.A. Determining the Monopolist's Price and Output Numerically I.A.1. Because an increase in output lowers the price on all previous units, the marginal revenue is below its price. I.A.1. If marginal cost exceeds marginal revenue, increasing production reduces profit. The Monopolist should not do it. I.A. Determining the Monopolist's Price and Output Graphically I.A.1. MR=MC Determines the Profit-Maximizing Output I.A.1.a. If marginal revenue is below marginal cost (making less than producing), you decrease production which causes marginal cost to decrease and increases marginal revenue. MR < MC
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Unformatted text preview: , DECREASE PRODUTION! I.A.1.a. If marginal cost is below marginal revenue, you should increase production because total profit will rise. MR > MC, INCREASE PRODUCTION! I.A.1.a. If marginal revenue is equal to marginal cost, it does not make sense to increase or reduce production. MC = MR, MAX PROFIT! I.A.1. The Price of a Monopolist Will Charge I.A.1.a. Quantity determines the price. You can see this by examining the demand curve. I.A. Comparing Monopoly and Perfect Competition I.B. An Example of Finding Output and Price I. Profits and Monopoly I.A. A Monopolist Making Profit I.B. A Monopolist Breaking Even and Making a Loss I. The Welfare Loss from Monopoly I. The Price-Discriminating Monopolist I. Barriers to Entry and Monopoly I.A. Natural Ability I.B. Economies of Scale I.C. Government Created Monopolies I. Normative Views of Monopoly I. Government Policy and Monopoly: AIDS Drugs...
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This note was uploaded on 10/25/2011 for the course ECON 2030 taught by Professor Russel during the Spring '11 term at LSU Health Sciences Center.

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