This preview shows page 1. Sign up to view the full content.
Unformatted text preview: P:
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
33 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 B can occur:
() ( , , ) ( ) ( ) If case B occurs the price will be given by:
, , The Lagrange multipliers will be:
() , Let’s check when Case C can occur:
This is not ( , ) , so that the PDS will always produce a positive output. If neither case B or C have occur (which means that as long as
case the output will be: ) then the solution must be Case D in which
( , ) ,
, ( )
, In case D the Lagrange multipliers will be: 34
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. ________________________________________________________...
View Full Document
This document was uploaded on 01/19/2014.
- Fall '14
- The Land