Monoply revised

Features of Monopoly ,[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

NATURAL MONOPOLIES ,[object Object],[object Object]

[object Object],[object Object],[object Object]

Competition vs monopoly: ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Profit maximization for a monopolist: ,[object Object],[object Object],[object Object],[object Object]

Profit maximization ,[object Object],[object Object],[object Object],[object Object]

Profit maximising under monopoly £ Q O MC Q m MR AC AR AC AR

Profit maximising under monopoly £ Q O MC Q m MR AC AR AC AR Total profit

Equilibrium of industry under perfect competition and monopoly: with the same MC curve £ Q O MC ( = supply under perfect competition) Q 1 MR P 1 Q 2 AR = D Comparison with Perfect competition P 2

The Monopolist Minimizes Losses in the Short Run p Marginal cost Average total cost Average variable cost Demand  Average revenue Marginal revenue 0 Q e c b a Loss Quantity per period Dollars per unit A monopolist may not always make profit

Short-Run Losses and the Shutdown Decision ,[object Object],[object Object],[object Object],[object Object],[object Object]

Monopolist’s Supply Curve ,[object Object],[object Object]

Dead Weight Loss: ,[object Object],[object Object],[object Object]

Price Discrimination ,[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],Types of price discrimination

First Degree Price Discrimination (Perfect Price Discrimination) ,[object Object],[object Object]

1st. degree price discrimination Price Quantity Demand PL Q P1 Q1

1st. degree price discrimination Price Quantity Demand PL Q For each consumer price charged=price willing to pay Monopolist appropriates all consumer surplus P1 P2 P3 P4 . .

2nd Degree Price Discrimination (non - linear pricing) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Profit-maximising output under third degree price discrimination fig O O O MR X MR Y MR T MC D Y 5 7 1000 2000 3000 (a) Market X (b) Market Y (c) Total (markets X + Y) 9 D X

Price and output in Mkt1 & Mkt2 (Maximise Profits) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Monoply revised

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Monoply revised