ajaz_eco_204_2012_2013_chapter_16_Market_Power

51 eco 204 chapter 16 analysis of firms with market

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: P becomes: 50 ECO 204 Chapter 16: Analysis of Firms with Market Power (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. [ () ⏟ ⏟ Now we need to check the conditions for each of the following cases: When Case A Impossible Monopoly Profit Maximization Problem Case B Case C Case D () () () When () When neither Case B or C occur ⏟ found by () () () () Let’s check when Case B occurs: () () Case B happens when () ( ): You should compare this with the expression we had in RMP. Let’s check when Case C occurs: () () Case C happens when () ( ): That is, when the maximum willingness to pay is less than or equal to marginal cost. 51 ECO 204 Chapter 16: Analysis of Firms with Market Power (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. If neither case B or C occur (which means that as long as ) then the solution must be Case D and output will be: You should compare the profit maximizing output with the revenue maximizing output – which is larger? Now: ( ) You shoul...
View Full Document

Ask a homework question - tutors are online