1. Lectures in Microeconomics-Charles W. Upton Monopoly

2. P Q $10 10 $100 $8 B 13

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

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

5. Monopoly 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.

6. Monopoly 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. This is not the standard textbook definition of a monopoly as the sole producer of a good, but it works better.

7. Monopoly Pick the Monopoly Is Microsoft a monopoly?

8. Monopoly Pick the Monopoly Is Microsoft a monopoly? It has competition

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

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

11. Monopoly Marginal and Total Revenue TR q max $ Maximizes Revenue

12. Monopoly Marginal and Total Revenue TR q max $ Maximizes Revenue MR

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

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

15. Monopoly Profit Maximization D MR MC P Q qoqo q o /2 q1q1 p1p1 MR = MC

16. Monopoly MR < P D MR MC P Q qoqo q o /2 q1q1 p1p1 MR = MC MR < P. MR is the price at which the incremental unit sells less the lost revenue on the previous units.

17. Monopoly P > MC D MR MC P Q qoqo q o /2 q1q1 p1p1 MR = MC Since the monopolist sets MR = MC, the profit maximizing price exceeds marginal cost.

18. Monopoly Linear Demand Functions D MR MC P Q qoqo q o /2 q1q1 p1p1 MR = MC The MR curve is a straight line, hitting the price axis halfway between the origin and the point where the demand function hits the quantity axis

19. Monopoly Linear Demand Functions D MR MC P Q qoqo q o /2 q1q1 p1p1 MR = MC The MR curve is a straight line, hitting the price axis halfway between the origin and the point where the demand function hits the quantity axis This point applies only to straight line demand functions

20. Monopoly End ©2003 Charles W. Upton