ajaz_eco_204_2012_2013_chapter_16_Market_Power

Eco 204 s ajaz hussain do not distribute lets check

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Unformatted text preview: _________________________________________E Example 3: Suppose a monopolist has a linear demand curve: Assume that , and that the firm has constant returns: Solve the RMP: ⏟ The RMP becomes: () [ ⏟ ⏟ Now we need to check the conditions for each of the following cases: Monopoly Revenue Maximization Problem Case C Case B Case D () When ⏟ () When When neither Case B or C occur ⏟ found by () () Now: Let’s check when Case B occurs: () Notice that unconstrained solution. If case B occurs then: In case B the Lagrange multipliers will be: 35 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. () Let’s check when Case C occurs: () Since this company will always produce a positive output. If neither case B or C occur (which means that as long as ) then the solution must be Case D and output will be: If case D occurs then: ( ) ( ) In case Dthe Lagrange multipliers will be: __________________________________________________________________________________________________ Example 4: Suppose a mon...
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This document was uploaded on 01/19/2014.

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