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ajaz_eco_204_2012_2013_chapter_16_Market_Power

# First lets show that whenever arrange the foc to see

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Unformatted text preview: () When When neither Case B or C occur Case A Impossible ⏟ found by () () We have modeled the following problem: 29 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. ⏟ ⏟ To see how the ECO 204 RMP differs from the ECO 100 “revenue maximization rules” that and a look at the RMP whenever unconstrained solution (cases B and D): notice that : Case D Case B When is ⏟? When is let take and ⏟? When is When is If neither cases B or C s.t. If Supply Point Supply Point () Unconstrained solution Unconstrained solution Demand Demand Let’s prove these results formally. First, let’s show that whenever arrange the FOC to see that: unconstrained solution that . Re - () ⏟ ( ) From the envelope theorem we know that: Since we are looking at unconstrained solution we see that in cases B and D that: As such, the FOC becomes: ⏟ ( ⏟ ) ⏟ ⏟ ⏟ 30 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. This proves that whenever Next, we show that wh...
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