1. Which curve is the demand curve? –Curve 1 Which curve is the marginal revenue curve? –Curve 2 Why? –For a monopoly to sell more, they must decrease price, therefore marginal revenue is less than demand. Market power because only one firm. Test Yourself Monopoly Quantity $ 1 2

2. What is equilibrium price and quantity for perfect competition? –P2Q2–P2Q2 –P1Q1–P1Q1 Why? –Set MC = MR and read price off demand curve Test Yourself Monopoly Quantity $ D MR MC P1P2P3P1P2P3 Q 1 Q 2

3. What is CS for a monopoly? –CS = WTP - price What is PS for a monopoly –PS = price - cost What is deadweight loss? –Loss in surplus because not at efficient point Test Yourself Monopoly Quantity $ D MR MC P1P2P3P1P2P3 Q 1 Q 2