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Unformatted text preview: firm, expensive to put up new ones for new firm) 2. Description a. Monopolies are price makers, competitive firms (atomistic) are price takers. b. MR = MC, where cost is roughly same as competitive firm i. Demand = Price = AR = MR in competitive firms 1. Demand curve is flat c. Monopolies must drop price to increase demand i. MR < Price ii. Profit is maximized when MR = MC 1. Go up to demand curve to find the price 2. Go up to ATC to find cost 3. Area btwn the two is profit 4. Monopoly price is on the demand curve above where MR=MC 5. Competitive firm price is on demand curve where MC =Demand d. Welfare: i. CS decreases, PS increases...
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This note was uploaded on 04/07/2008 for the course EC 10 taught by Professor Mankiw during the Spring '08 term at Harvard.
- Spring '08