Monopoly Lectures in MicroeconomicsCharles W Upton Monopoly P

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Monopoly Lectures in Microeconomics-Charles W. Upton

Monopoly Lectures in Microeconomics-Charles W. Upton

Monopoly P $10 $8 $100 B Q 10 13 Monopoly

Monopoly P $10 $8 $100 B Q 10 13 Monopoly

Monopoly P $10 $8 $100 B D Q 10 13 Monopoly

Monopoly P $10 $8 $100 B D Q 10 13 Monopoly

Monopoly P $10 $8 A $100 B 10 D 13 Monopoly Q

Monopoly P $10 $8 A $100 B 10 D 13 Monopoly Q

A working definition • A monopolist is a firm facing a downward sloping demand

A working definition • A monopolist is a firm facing a downward sloping demand curve, and who takes the prices charged by competing firms as given. Monopoly

A working definition • A monopolist is a firm facing a downward This is

A working definition • A monopolist is a firm facing a downward This is not the standard textbook sloping demand curve, and who takes the definition of a monopoly as the prices charged by competing firms as given. sole producer of a good, but it works better. Monopoly

Pick the Monopoly • Is Microsoft a monopoly? Monopoly

Pick the Monopoly • Is Microsoft a monopoly? Monopoly

Pick the Monopoly • Is Microsoft a monopoly? • It has competition Monopoly

Pick the Monopoly • Is Microsoft a monopoly? • It has competition Monopoly

Pick the Monopoly • Is Joe’s Corner • Is Microsoft a Grocery a monopoly?

Pick the Monopoly • Is Joe’s Corner • Is Microsoft a Grocery a monopoly? • It has competition Monopoly

Pick the Monopoly • Is Joe’s Corner • Is Microsoft a Grocery a monopoly?

Pick the Monopoly • Is Joe’s Corner • Is Microsoft a Grocery a monopoly? • It has competition • It is not a price taker; if it raises prices a little bit, its customers will not disappear. Monopoly

Marginal and Total Revenue $ TR Maximizes Revenue Monopoly qmax

Marginal and Total Revenue $ TR Maximizes Revenue Monopoly qmax

Marginal and Total Revenue $ TR Maximizes Revenue Monopoly qmax MR

Marginal and Total Revenue $ TR Maximizes Revenue Monopoly qmax MR

Monopoly P $10 $8 A $100 B 10 D 13 Monopoly Q

Monopoly P $10 $8 A $100 B 10 D 13 Monopoly Q

Monopoly P $10 $8 A $100 MR = B - A B 10 D

Monopoly P $10 $8 A $100 MR = B - A B 10 D 13 Monopoly Q

Profit Maximization P MC p 1 MR = MC MR q 1 q /2

Profit Maximization P MC p 1 MR = MC MR q 1 q /2 o D Monopoly qo Q

MR < P P p 1 MR q 1 q /2 o MR <

MR < P P p 1 MR q 1 q /2 o MR < P. MR is the MC price at which the incremental unit sells MR = MC less the lost revenue D on the previous units. Monopoly qo Q

P > MC P p 1 MR q 1 q /2 o Since the

P > MC P p 1 MR q 1 q /2 o Since the MC monopolist sets MR = MC, the profit maximizing MR = MC price exceeds D marginal cost. Monopoly qo Q

Linear Demand Functions P p 1 MR q 1 q /2 o The MR

Linear Demand Functions P p 1 MR q 1 q /2 o The MR curve is a straight line, hitting MC the price axis halfway between the origin and the point where MR = MC the demand function D hits the quantity axis Monopoly qo Q

Linear Demand Functions P The MR curve is a straight line, hitting MC the

Linear Demand Functions P The MR curve is a straight line, hitting MC the price axis halfway This point applies between the origin ponly to straight line and the point where 1 MR = MC the demand functions D hits the quantity axis MR q 1 q /2 o Monopoly qo Q

End © 2003 Charles W. Upton Monopoly

End © 2003 Charles W. Upton Monopoly