范里安微观经济学(第九版)chapter10.pptx

Chapter 10Market Power: Monopoly and MonopsonyTopics to be DiscussedChapter 10Monopoly and Monopoly PowerSources of Monopoly PowerThe Social Costs of Monopoly PowerMonopsony and Monopsony PowerLimiting Market Power: The Antitrust LawsReview of Perfect CompetitionChapter 10P = MC = ACNormal profits or zero economic profits in the long runLarge number of buyers and sellersHomogenous productPerfect informationFirm is a price takerMarketIndividual FirmPPDSLMCLRACP0P0D = MR = Pq0Q0QQReview of Perfect CompetitionChapter 10MonopolyChapter 10MonopolyOne seller - many buyersOne product (no good substitutes)Barriers to entryPrice MakerMonopolyChapter 10The monopolist is the supply-side of the market and has complete control over the amount offered for saleMonopolist controls price but must consider consumer demandProfits will be maximized at the level of output where marginal revenue equals marginal costAverage and Marginal RevenueChapter 10The monopolist’s average revenue, price received per unit sold, is the market demand curveMonopolist also needs to find marginal revenue, change in revenue resulting from a unit change in outputMR is generally lower than AR. Why?$ perunit ofoutput765Average Revenue (Demand)432MarginalRevenue1Outpuverage and Marginal RevenueChapter 10MonopolyChapter 10ObservationsTo increase sales the price must fallMR PCompared to perfect competitionNo change in price to change salesMR = PMCP1P*ACP2LostprofitD = ARLostprofitMRQ*Q2Q1Monopolist’s Output Decision$ perunit ofoutputQuantityChapter 10Monopoly: An ExampleChapter 10Monopoly: An ExampleChapter 10$/Q40MCP=30ACProfit20ARAC=1510Mxample of Profit MaximizationProfit = (P - AC) x Q = ($30 - $15)(10) = $150QuantityChapter 10MonopolyChapter 10A Rule of Thumb for PricingWe want to translate the condition that marginal revenue should equal marginal cost into a rule of thumb that can be more easily applied in practiceLooking at Marginal Revenue we can see that it has two componentsA Rul