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4. Market Differences Between Monopoly and Perfect Competition Marginal Revenue and Marginal Cost Relationship for Monopoly Production Profit Maximization Function for Monopolies Monopoly Production Decision Monopoly Price and Profit Monopoly Production and Pricing Decisions and Profit Outcome Monopoly > Monopoly Production and Pricing Decisions and P... Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/economics/textbooks/boundless-economics-textbook/monopoly-11/monopoly-production-and-pricing-decisions-and-profit- outcome-71/

5. Free to share, print, make copies and changes. Get yours at www.boundless.com Appendix

6. Key terms deadweight loss A loss of economic efficiency that can occur when an equilibrium is not Pareto optimal. demand The desire to purchase goods and services. economic profit The difference between the total revenue received by the firm from its sales and the total opportunity costs of all the resources used by the firm. first-order condition A mathematical relationship that is necessary for a quantity to be maximized or minimized. marginal cost The increase in cost that accompanies a unit increase in output; the partial derivative of the cost function with respect to output. Additional cost associated with producing one more unit of output. marginal revenue The additional profit that will be generated by increasing product sales by one unit. network externality The effect that one user of a good or service has on the value of that product to other people perfect competition A type of market with many consumers and producers, all of whom are price takers perfect information The assumption that all consumers know all things, about all products, at all times, and therefore always make the best decision regarding purchase. Free to share, print, make copies and changes. Get yours at www.boundless.com Monopoly

7. Electricity Distribution The cost of electrical infrastructure is so expensive that there are few or no competitors for electricity distribution. This creates a monopoly. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikipedia. "Electricalgrid." Public domain http://en.wikipedia.org/wiki/File:Electricalgrid.jpg View on Boundless.comPublic domainhttp://en.wikipedia.org/wiki/File:Electricalgrid.jpgView on Boundless.com Monopoly

8. Monopoly Production Monopolies produce at the point where marginal revenue equals marginal costs, but charge the price expressed on the market demand curve for that quantity of production. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikimedia. "Imperfect competition in the short run." CC BY-SA http://commons.wikimedia.org/wiki/File:Imperfect_competition_in_the_short_run.svg View on Boundless.comCC BY-SAhttp://commons.wikimedia.org/wiki/File:Imperfect_competition_in_the_short_run.svgView on Boundless.com Monopoly

9. Monopoly Pricing Monopolies create prices that are higher, and output that is lower, than perfectly competitive firms. This causes economic inefficiency. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikimedia. "Monopoly pricing example 01." CC BY-SA http://commons.wikimedia.org/wiki/File:Monopoly_pricing_example_01.svg View on Boundless.comCC BY-SAhttp://commons.wikimedia.org/wiki/File:Monopoly_pricing_example_01.svgView on Boundless.com Monopoly

10. In a monopoly market, the marginal revenue curve and the demand curve are distinct and downward-sloping. Production occurs where marginal cost and marginal revenue intersect. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikimedia. "Imperfect competition in the short run." CC BY-SA http://commons.wikimedia.org/wiki/File:Imperfect_competition_in_the_short_run.svg View on Boundless.comCC BY-SAhttp://commons.wikimedia.org/wiki/File:Imperfect_competition_in_the_short_run.svgView on Boundless.com Monopoly

11. Perfect Competition In a perfectly competitive market, the marginal revenue curve is horizontal and equal to demand, or price. Production occurs where marginal cost and marginal revenue intersect. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikimedia. "Economics Perfect competition." CC BY-SA http://commons.wikimedia.org/wiki/File:Economics_Perfect_competition.svg View on Boundless.comCC BY-SAhttp://commons.wikimedia.org/wiki/File:Economics_Perfect_competition.svgView on Boundless.com Monopoly

12. Monopoly Diagram This graph illustrates the price and quantity of the market equilibrium under a monopoly. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikimedia. "Imperfect competition in the short run." CC BY-SA http://commons.wikimedia.org/wiki/File:Imperfect_competition_in_the_short_run.svg View on Boundless.comCC BY-SAhttp://commons.wikimedia.org/wiki/File:Imperfect_competition_in_the_short_run.svgView on Boundless.com Monopoly

13. Attribution Boundless Learning. "Boundless." CC BY-SA 3.0 http://www.boundless.com//economics/definition/perfect-competitionCC BY-SA 3.0http://www.boundless.com//economics/definition/perfect-competition Wikipedia. "perfect information." CC BY-SA 3.0 http://en.wikipedia.org/wiki/perfect%20informationCC BY-SA 3.0http://en.wikipedia.org/wiki/perfect%20information Wikipedia. "network externality." CC BY-SA 3.0 http://en.wikipedia.org/wiki/network%20externalityCC BY-SA 3.0http://en.wikipedia.org/wiki/network%20externality Wikipedia. "Monopoly." CC BY-SA 3.0 http://en.wikipedia.org/wiki/MonopolyCC BY-SA 3.0http://en.wikipedia.org/wiki/Monopoly Wiktionary. "marginal cost." CC BY-SA 3.0 http://en.wiktionary.org/wiki/marginal_costCC BY-SA 3.0http://en.wiktionary.org/wiki/marginal_cost Wikipedia. "marginal revenue." CC BY-SA 3.0 http://en.wikipedia.org/wiki/marginal%20revenueCC BY-SA 3.0http://en.wikipedia.org/wiki/marginal%20revenue Wikipedia. "Monopoly." CC BY-SA 3.0 http://en.wikipedia.org/wiki/MonopolyCC BY-SA 3.0http://en.wikipedia.org/wiki/Monopoly Wikipedia. "deadweight loss." CC BY-SA 3.0 http://en.wikipedia.org/wiki/deadweight%20lossCC BY-SA 3.0http://en.wikipedia.org/wiki/deadweight%20loss Boundless Learning. "Boundless." CC BY-SA 3.0 http://www.boundless.com//economics/definition/first-order-conditionCC BY-SA 3.0http://www.boundless.com//economics/definition/first-order-condition Wiktionary. "marginal cost." CC BY-SA 3.0 http://en.wiktionary.org/wiki/marginal_costCC BY-SA 3.0http://en.wiktionary.org/wiki/marginal_cost Wikipedia. "marginal revenue." CC BY-SA 3.0 http://en.wikipedia.org/wiki/marginal%20revenueCC BY-SA 3.0http://en.wikipedia.org/wiki/marginal%20revenue Wikipedia. "Monopoly." CC BY-SA 3.0 http://en.wikipedia.org/wiki/MonopolyCC BY-SA 3.0http://en.wikipedia.org/wiki/Monopoly Wiktionary. "demand." CC BY-SA 3.0 http://en.wiktionary.org/wiki/demandCC BY-SA 3.0http://en.wiktionary.org/wiki/demand Boundless Learning. "Boundless." CC BY-SA 3.0 http://www.boundless.com//economics/definition/economic-profit--2CC BY-SA 3.0http://www.boundless.com//economics/definition/economic-profit--2 Wikipedia. "Monopoly profit." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Monopoly_profitCC BY-SA 3.0http://en.wikipedia.org/wiki/Monopoly_profit Wikipedia. "Monopoly." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Monopoly%23The_inverse_elasticity_ruleCC BY-SA 3.0http://en.wikipedia.org/wiki/Monopoly%23The_inverse_elasticity_rule Free to share, print, make copies and changes. Get yours at www.boundless.com Monopoly