Water distillery ex patent licensing fee ownership of

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Unformatted text preview: Patent, Licensing Fee Ownership of resources: A monopoly arises when Ownership the monopolist has sole access to resources without a close substitute. without Ex. Lime Stone 4 2 Properties of a Monopoly 2. Monopolist is a price searcher. Price and quantity changes by the Price monopolist has a big effect on the market. monopolist The monopolist faces the entire industry’s The demand. demand. Competitive Market Marginal Competitive Revenue Price Monopolist Market Demand Monopolist and Marginal Revenue and Price MR MR Quantity Marginal Revenue is horizontal Marginal because price is set by market forces. because Demand Quantity 5 Because monopolist sets P and Q, demand Because and marginal revenue is the industry’s curve. and Profit maximizing Q and P for a Profit Monopolist: 2 approaches Monopolist: 1. TR – TC Approach The Monopolist’s Profit Maximizing P and Q is The where Profit = TR – TC is the highest. where 2. MR = MC Approach Note: Monopolist MR is ALWAYS < P Here’s an example: Suppose a monopolist supplies Here’s 3 units of a good at a price of 8 and 4 units of a good at a price of 7. good P1=7, Q1=4...
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