Chap009.4 - Profit Maximization for the Monopolist Profit...

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4 Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 19 Profit Maximization for the Monopolist ± For a producer z MB = Marginal Revenue ( MR ) or a change in a firm’s total revenue that results from a one-unit change in output Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 20 Profit Maximization for the Monopolist ± Marginal Revenue for the Monopolist z Perfect competition and monopolies ² Both increase output when MR > MC. ² Calculate MC the same way. ² Do not have the same MR at a given price. o In perfect competition: MR = P o In monopoly: MR < P Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 21 The Monopolist’s Benefit from Selling an Additional Unit Price ($/unit) Quantity (units/week) D 8 8 2 6 3 5 If P = $6, then TR = $6 x 2 = $12 If P = $5, then TR = $5 x 3 = $15 The MR of selling the 3 rd unit = $3 (15-12) For the 3 rd unit, MR = $3 < P = $5 Chapter 9: Monopoly and Other Forms of Imperfect Competition
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