Eco 204 s ajaz hussain do not distribute rational

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: 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...
View Full Document

This document was uploaded on 01/19/2014.

Ask a homework question - tutors are online