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( ) The RMP becomes:
[, () , ⏟
⏟ Now we need to check the conditions for each of the following cases:
Monopoly Revenue Maximization Problem
When neither Case B or C occur
⏟ found by ()
( , ) Let’s check if/when Case B will occur:
This is not ( , ) ( , ) , so that the PDS will not produce at capacity. Let’s check if Case C can occur:
This is not , ( ) , so that the PDS will produce a positive output. Since neither case B or C have occurred the solution must be Case D. To find the output set:
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:
, ( , ) Optimal revenues are:
The Lagrange multipliers are: __________________________________________________________________________________________________
Example 2: Prestige Data Services’ Commercial Data Services:
● Hours ● = $/hour ,
Solve the RM...
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This document was uploaded on 01/19/2014.
- Fall '14
- The Land