Dderf
Lecture VII L t
THE MONOPOLY
The market equilibrium – REPETITION lecture VI
E
20
D
e supply d
Cc
16
price
12
b
8
B
a
4
A
demand
0 0 100 200 300 400 500 600 700 800
Quantity
The minimal price and shutdown point – repetition lecture V
P
MC
AC AVC
P = MR
Pmin Pshutdown Qshut
Qmin
QE
Q
Demand and Marginal Revenue Faced by a Competitive Firm - repetition
Price $ per bushel
Firm
Price $ per bushel
Industry
$4
d
$4
D 100 200
Output (bushels)
100
Output (millions of bushels)
TC, TR
TR
TC
QD/G - b k breakeven points i t
0 P, AC AC
Q
P = MR
Losses
QD
Profit
QG
Losses
Q
Monopoly
Monopoly 1) One seller - many buyers ) y y 2)One product (no good substitutes) 3)Barriers to entry
Monopoly
A monopoly i a single supplier t a l is i l li to market
This firm ma choose to produce at an fi m may p od ce any point on the market demand curve
Technical Barriers to Entry
Economies of scale E i f l Large entry costs Information advantage Ownership of a unique resource
Legal Barriers to Entry g y
Patents Exclusive franchises
Monopolist is limited by the demand and the production costs. costs The demand is influenced by: The product price (p), which is set by the monopolist Non-price Non price factors
Q = Qd[(-)p, (+)M, (-)pk,...]
The demand function (non-price factors are constant)
Q = QD(p)
The inverse form:
p = p(Q) p( ) Total revenue function: TR = p(Q) * Q
Marginal revenue function: MR M i l f ti
= dTR(Q) / dQ
IMPORTANT:
Total revenue function (in case of monopoly market):
TR = p(Q) * Q
But no: TR = Q(p) * p (p) Example:
Q = 50 – 10 *p → p = 5 – 0 1 *Q 0,1 then th TR = p(Q) NO: TR
* Q = (5-0,1*Q) * Q (5 0 1*Q)
= (50 – 10*p) * p 10 p) = dTR(Q) / dQ
The function of marginal revenue: MR
Monopoly
The monopolist is the supply side of supply-side the
THE MONOPOLY
The market equilibrium – REPETITION lecture VI
E
20
D
e supply d
Cc
16
price
12
b
8
B
a
4
A
demand
0 0 100 200 300 400 500 600 700 800
Quantity
The minimal price and shutdown point – repetition lecture V
P
MC
AC AVC
P = MR
Pmin Pshutdown Qshut
Qmin
QE
Q
Demand and Marginal Revenue Faced by a Competitive Firm - repetition
Price $ per bushel
Firm
Price $ per bushel
Industry
$4
d
$4
D 100 200
Output (bushels)
100
Output (millions of bushels)
TC, TR
TR
TC
QD/G - b k breakeven points i t
0 P, AC AC
Q
P = MR
Losses
QD
Profit
QG
Losses
Q
Monopoly
Monopoly 1) One seller - many buyers ) y y 2)One product (no good substitutes) 3)Barriers to entry
Monopoly
A monopoly i a single supplier t a l is i l li to market
This firm ma choose to produce at an fi m may p od ce any point on the market demand curve
Technical Barriers to Entry
Economies of scale E i f l Large entry costs Information advantage Ownership of a unique resource
Legal Barriers to Entry g y
Patents Exclusive franchises
Monopolist is limited by the demand and the production costs. costs The demand is influenced by: The product price (p), which is set by the monopolist Non-price Non price factors
Q = Qd[(-)p, (+)M, (-)pk,...]
The demand function (non-price factors are constant)
Q = QD(p)
The inverse form:
p = p(Q) p( ) Total revenue function: TR = p(Q) * Q
Marginal revenue function: MR M i l f ti
= dTR(Q) / dQ
IMPORTANT:
Total revenue function (in case of monopoly market):
TR = p(Q) * Q
But no: TR = Q(p) * p (p) Example:
Q = 50 – 10 *p → p = 5 – 0 1 *Q 0,1 then th TR = p(Q) NO: TR
* Q = (5-0,1*Q) * Q (5 0 1*Q)
= (50 – 10*p) * p 10 p) = dTR(Q) / dQ
The function of marginal revenue: MR
Monopoly
The monopolist is the supply side of supply-side the