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in cases B and D: whenever unconstrained solution unconstrained solution (i.e. cases B and D) that .
. We know that ()
Using the product rule we have:
() () ⏟ ⏟ This is an especially important result for a firm with a constant elasticity demand model: if such a firm produces output
then it cannot be that
(see example 4 below).
Summary of Monopoly Profit Maximization Problem for
When neither Case B or C occur
Example 1: Prestige Data Services’ Commercial Data Services:
● Hours ● = $/hour ,
For argument’s sake, suppose that capacity is 105% of maximum market size. Solve the PMP:
To find maximum market size, re-arrange the demand curve to get:
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. ,
The maximum market siz...
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This document was uploaded on 01/19/2014.
- Fall '14
- The Land