Lec_05_monopoly

# Lec_05_monopoly - Econ 2 TA section assignments Mon 4-4:50...

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1 Econ 2 TA section assignments Ayal Chen-Zion PETER 103 Fri 5-5:50 Soojin Jo PETER 103 Fri 4-4:50 Martha Gimbel PETER 103 Wed 5-5:50 Roy Allen CENTR 222 Wed 3-3:50 Matthew Louie WLH 2204 Mon 10-10:50 (1) Vinayak Alladi (2) Ahmad-Reza Sharif PETER 103 Mon 4-4:50 (1) first half of course; (2) second half of course Chapter 9: Monopoly, Oligopoly, and Monopolistic Competition A. Total revenue and marginal revenue B. Total cost, marginal cost and fixed cost C. Profit maximization D. Monopoly Q P Demand for firm’s product: P = a - bQ Demand curve: slope = -b Intercept = a Marginal revenue curve: slope = -2b Price and output decision for a firm that is a monopoly Monopolist will choose Q so that MR = MC Q P demand MR MC Q1 Firm chooses level of output given by Q1 Firm will charge highest price it can Q P demand MR MC Q1 Firm chooses level of output given by Q1 P1 Firm chooses price given by P1

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2 Chapter 9: Monopoly, Oligopoly, and Monopolistic Competition A. Total revenue and marginal revenue B. Total cost, marginal cost and fixed cost C. Profit maximization D. Monopoly E. Perfect competition We said that a monopolist would make the most profit by setting MR = MC But wouldn’t all firms, whether or not they have a monopoly, also want to set MR = MC? Answer: yes they would and standard economic theory assumes that they do Consider entire U.S. market for tomatoes • More than 5 million tons produced each year • Sell wholesale for about \$50/ton Consider entire U.S. market for tomatoes • More than five million tons produced each year • Sell wholesale around \$50/ton • Suppose demand has elasticity of 1 • Means 10% increase in U.S. production
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Lec_05_monopoly - Econ 2 TA section assignments Mon 4-4:50...

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