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  • Monopoly Demand Curve: in Any Market, The Demand Curve Is - This Is The Result of The

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    Nilangshu Dutta
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    The document discusses key concepts regarding monopoly demand curves and how they differ from competitive markets. It makes three key points: 1) A monopoly is the only producer in an industry, so its demand curve is the industry demand curve. This means the monopoly faces a downward-sloping demand curve like in other markets. 2) Unlike competitive markets, a monopoly's marginal revenue is always below its price because it must lower prices on all existing units as it increases total output along the demand curve. 3) The monopoly chooses its profit-maximizing output where marginal revenue equals marginal cost, which results in the monopoly supplying less output and charging a higher price than would occur under perfect competition.

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    Economics concepts

    Оригинальное название

    15-2MonoDem

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    The document discusses key concepts regarding monopoly demand curves and how they differ from competitive markets. It makes three key points: 1) A monopoly is the only producer in an industry, so its demand curve is the industry demand curve. This means the monopoly faces a downward-sloping demand curve like in other markets. 2) Unlike competitive markets, a monopoly's marginal revenue is always below its price because it must lower prices on all existing units as it increases total output along the demand curve. 3) The monopoly chooses its profit-maximizing output where marginal revenue equals marginal cost, which results in the monopoly supplying less output and charging a higher price than would occur under perfect competition.

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    © All Rights Reserved
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    Отметить как неприемлемый контент
    7 просмотров2 страницы

    Monopoly Demand Curve: in Any Market, The Demand Curve Is - This Is The Result of The

    Загружено:

    Nilangshu Dutta
    The document discusses key concepts regarding monopoly demand curves and how they differ from competitive markets. It makes three key points: 1) A monopoly is the only producer in an industry, so its demand curve is the industry demand curve. This means the monopoly faces a downward-sloping demand curve like in other markets. 2) Unlike competitive markets, a monopoly's marginal revenue is always below its price because it must lower prices on all existing units as it increases total output along the demand curve. 3) The monopoly chooses its profit-maximizing output where marginal revenue equals marginal cost, which results in the monopoly supplying less output and charging a higher price than would occur under perfect competition.

    Авторское право:

    © All Rights Reserved
    Скачайте в формате PDF, TXT или читайте онлайн в Scribd
    Отметить как неприемлемый контент
    из 2

    The Demand Curve

    Facing a Monopoly Firm

    Monopoly Demand Curve { In any market, the industry


    demand curve is downward-
    sloping. This is the result of the
    Chapter 15-2 law of demand.

    The Key Difference


    Between a Monopolist and a Perfect
    Monopolist is the Industry Competitor
    { Critical to understanding the profit { A monopolistic firms marginal
    maximization of the monopolist is revenue is not its price
    remembering that the monopolist { Marginal revenue is always below its
    price
    is the industry because it is the
    sole producer. { Marginal revenue changes as output
    changes and is not equal to the price
    { Therefore the monopolist confronts
    a downward-sloping demand curve. A monopolistic firms output decision can affect price
    The industry demand curve is There is no competition in monopolistic markets so
    the firms demand curve. monopolists see to it that monopolists, not consumers,
    benefit

    15-4

    Marginal Revenue The Monopolists Price and Output


    Numerically
    { Recall that the marginal revenue { Remember is that marginal
    (MR) is: revenue is the change in total
    TR revenue that occurs as a firm
    MR = changes its output.
    Q

    TR=P x Q

    MR = Change in Total Revenue/ change in output

    Another way to say it is:


    how much does your Total Revenue changes as you increase output
    output

    1
    Demand Curve for Monopoly Firm
    Marginal Revenue < Price

    { MR is less than price for a


    monopoly firm.
    { The MR is less than price and
    declines as output increases
    because the monopolist must
    lower the price in order to sell
    more units (because the demand
    curve slopes downward).

    The Monopolists Price and Output Average Revenue


    Numerically

    { When a monopolist increases { Whenever MR is greater than AR, AR


    rises.
    output, it lowers the price on all
    { Whenever MR is less than AR, AR
    previous units.
    falls.
    { As a result, a monopolists marginal { Average revenue is:
    revenue is always below its price.
    P Q
    AR = =P
    Q

    Demand and
    Average Revenue > Marginal Revenue Revenue for the
    Monopolist
    { Note that the AR is the same as
    price. In fact, the AR curve is
    the demand curve.
    { With a downward-sloping demand
    curve, prices fall as output
    increases. This means that AR
    falls.
    { MR must always be less than
    AR.

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