ajaz_eco_204_2012_2013_chapter_16_Market_Power

Eco 204 s ajaz hussain do not distribute rational

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Unformatted text preview: the RMP and PMP examples above, compute the price elasticity at the optimal solution and verify that for PMP and that for RMP . 8. “Monopoly vs. Competition”8 We have seen two cases where a monopolist produces positive output: Summary of Monopoly Profit Maximization Problem for Case B Case D () When () When neither Case B or C occur found by () () These cases are shown below for a monopolist with a linear demand curve, constant returns and 8 Note to self: redo the whole thing with weights on social welfare 57 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. Rational “Monopoly”: PMP Case B Case D Supply Point Supply Point () () Unconstrained solution Unconstrained solution Demand Demand Notice that in both cases the monopolist has positive producer’s surplus ∫( measured as: ) __________________________________________________________________________________________________ Note: In the short run producer’s surplus is equal to gross profits (aka gross margin) since: ∫( ) ∫ ∫ ( ∫ ) __________________________________________________________________________________________________ In cases B a...
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