Chapter 10 Market Power市场力量.pptVIP

Chapter 10 Market Power: Monopoly and Monopsony Chapter Outline Monopoly Monopoly Power Sources of Monopoly Power The Social Costs of Monopoly Power Monopsony Power Limiting Market Power: The Antitrust Laws 10.1 Monopoly Monopoly -- Market with only one seller Monopoly power -- The ability of a firm to profitably charge a price higher than marginal cost. Monopsony -- Market with only one buyer. Monopsony power -- Buyer’s ability to affect the price of a good. Marginal revenue -- Change in revenue resulting from a 1 unit increase in output. Q* is the output level at which MR = MC (? =R -C, profit-maximization △?/△Q = △R /△Q -△C/△Q = 0). If the firm produces a smaller output--say, Q1--it sacrifices some profit because the extra revenue that could be earned for producing and selling the units between Q1 and Q* exceeds cost of producing them. Similarly, expanding output from Q* to Q2 would reduce profit because the additional cost would exceed the additional revenue. Part (a) shows total revenue R, total cost C, and profit, the difference between the two. Part (b) shows average and marginal revenue and average and marginal cost. Marginal revenue is the slope of the total revenue curve, and marginal cost is the slope of the total cost curve. Suppose: C(Q) = 50 + Q2 (MC = △C/△Q = 2Q) P(Q) = 40 – Q R = P(Q)Q =( 40 – Q)Q MR = 40 – 2Q MC =MR 40 – 2Q = 2Q Q = 10 The profit-maximizing output is Q* = l0, the point where marginal revenue equals marginal cost. At this output level, the slope of the profit curve is zero, and the slopes of the total revenue and total cost curves are equal. The profit per unit is $15, the difference between average revenue and average cost. Because 10 units are produced, total profit is $150. MR =