ajaz_eco_204_2012_2013_chapter_16_Market_Power

Do not distribute case a check whenif check whenif

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Unformatted text preview: ) ⏟ ⏟ , , , ⏟, [ ⏟] [ The KT cases are: , , , ⏟, ⏟ When is When is ⏟ ? ⏟ When is ⏟ When is When is ⏟ When is Starting with the “animal” expression [ ⏟] [ followed by the “animal” we see that there are 4 possible solutions to a monopolists’ general PMP: Case A ⏟ Case B Check when/if ⏟? Case C ⏟ Case D Check when/if Check when/if Check when/if Check when/if ? Check when/if ⏟? Check when/if ? Check when/if We now examine each case separately. 41 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. Case A ⏟ Check when/if Check when/if Case A is impossible because it’s impossible for and Next: Case B Check when/if ⏟? Check when/if This says the company should produce at capacity (which is assumed to be strictly positive). Therefore we know that To see when Case B arises we need to see when . Substitute and in the FOC: () ⏟ ⏟ () () ⏟ () () () () This says that the firm should produce at 100% capacity if the marginal revenue at capacity is greater t...
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