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monopoly and oligopoly, A competitive firm takes P as given(because a…
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
