microeconomics module 61-25
DESCRIPTION
Microeconomics module for 61 25TRANSCRIPT
KRUGMAN'SMICROECONOMICS for AP*
Introduction to Monopoly
Margaret Ray and David Anderson
Micro:
Econ:
25
61
Module
What you will learnin this Module:• How a monopolist determines the
profit-maximizing price.
• How to determine whether a monopoly is earning a profit or a loss.
• How the monopoly outcome is different from the long-run outcome in perfect competition.
Monopoly Demand and MR
A Monopolist’s MR curve is below the D curve because the monopoly must lower price to sell more.
Profit-maximizing P and Q
A monopoly maximizes profit by producing the output level where MC = MR (like every firm does!)
Monopoly versus Perfect Competition
• Monopolies create inefficiency
• P > MCD
Output
MR
Qm= 3
Pc = $10
Pm = $14
$
MC = ATC
Profit = $12
The “Classic” Monopoly Graph
Figure 61.1 Comparing the Demand Curves of a Perfectly Competitive Producer and a MonopolistRay and Anderson: Krugman’s Economics for AP, First EditionCopyright © 2011 by Worth Publishers
Table 61.1 Demand, Total Revenue, and Marginal Revenue for the De Beers Diamond MonopolyRay and Anderson: Krugman’s Economics for AP, First EditionCopyright © 2011 by Worth Publishers
Figure 61.2 A Monopolist’s Demand, Total Revenue, and Marginal Revenue CurvesRay and Anderson: Krugman’s Economics for AP, First EditionCopyright © 2011 by Worth Publishers
Figure 61.3 The Monopolist’s Profit-Maximizing Output and PriceRay and Anderson: Krugman’s Economics for AP, First EditionCopyright © 2011 by Worth Publishers
Figure 61.4 The Monopolist’s ProfitRay and Anderson: Krugman’s Economics for AP, First EditionCopyright © 2011 by Worth Publishers