Please enable JavaScript.
Coggle requires JavaScript to display documents.
monopoly and oligopoly, A competitive firm takes P as given(because…
monopoly and
oligopoly
barriers to Entry
Monopolistic resources
Government regulation
Natural monopoly due to the production process A.K.A the economics of scale
This refers to the cost advantages that a company experiences as its production volume increases.
example
Electricity-firm-in-a-small-town-and-it-serves-the-power-for-1000-family example: The ATC slopes downward due to huge fixed cost and small MC in a graph
profit maximization for a monopolistic situation
Sets the highest price consumers are willing to pay for
that quantity
Finds this price on the D curve
the price later would be how much the consumers are willing to pay
P > MR = MC, If P > ATC, the monopoly earns profit.
MR ≠ P
a monopolist's Revenue
What Effects has Increasing Quantity on Revenue?
Output effect
The higher output raises the revenue
price effect
The lower price reduces revenue
The monopoli-st’s profit
the monopolist's profit equals (P - ATC) *Q
competition v. monopoly comparison: where the equlibrium point sits in a graph
Monopoly
The value to buyers of an additional unit (P) exceeds the cost of the resources needed to produce that unit(MC)
The monopoly Q is too low – could increase total
surplus with a larger Q.
deadweight loss
Monopoly equilibrium: at P > MR = MC
competition
Competitive market equilibrium point sits at
P = MC and maximizes total surplus there
competition v. monopoly comparison: the dominance over the price
A monopolistic firm doesn't require a supply curve, what determines the price has already shown jointly by the intersection of MR, MC and D
competition v. monopoly comparison: when does the deadweight loss appear?
Competitive equilibrium: quantity = QC, PC = MC
total surplus is maximized
no deadweight loss
marginal cost always equals demand
Monopoly equilibrium: quantity = QM, PM > MC
deadweight loss
Qm is what the quantity is matched at where MC and MR intersects
Pm is the price under Qm's intersection with D
dunno about the page
Price Discrimination
core idea
selling the same goods at different prices to the different buyers
A firm can increase profit by charging a higher price
to buyers with higher willingness to pay
A competitive firm takes P as given(because a competitive firm doesn't have a say over the price