Chapter 13 Monopoly

Marginal revenue 0 Q1 QMAX Q2 Quantity
A monopoly maximizes profit by choosing the quantity at which marginal revenue equals marginal cost (point A). It then uses the demand curve to find the price that will induce consumers to buy that quantity (point B).
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In monopoly market, there is no supply curve. ? Only one point. In perfectly market, MC is supply curve. MC sometimes is horizontal. Especially in monoply.
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设垄断厂商面对的市场需求为P=a-BQ， 则总收益曲线TR=PQ=aQ-bQ² ，

平均收益曲线AR=PQ/Q=P=a-bQ，
MR= ∆ TR/ ∆ Q=a-2bQ；
所以当垄断厂商面临的需求曲线是直线时，其边 际收益曲线总是位于平均收益曲线的下面，且斜 率是后者的二倍。从几何上看，MR曲线平分平均 收益曲线与纵轴垂直线段的中点。

Barriers to entry
resources (后面具体解释) Government regulation The production process
Monopoly
13.1 Why Monopolies Arise
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Monopoly resources A key resource required for production is owned by a single firm （oil） Government regulation Government gives a single firm the exclusive right to produce some good or service Patent (专利) ；Franchise（特许经营权）；copyright laws (版权法) Natural monopoly（自然垄断） A single firm can supply a good or service to an entire market At a smaller cost than could two or more firms Eg: Railway and urban utilities (铁路和城市公共事业)
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CH 13
Monopoly
Content
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13.1 Why Monopolies Arise 13.2 Production and Pricing Decisions 13.3 The Welfare Cost of Monopolies 13.4 Public Policy Toward Monopolies 13.5 Price Discrimination
13.2 Production and Pricing Decisions
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Monopoly Sole producer Price maker Downward sloping demand: the market demand curve Reduces price to increase sales
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13.2 Production and Pricing Decisions
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A monopoly’s total revenue P x Q = TR A monopoly’s average revenue AR = TR/Q = P A monopoly’s marginal revenue MR= ∆ TR/ ∆ Q because max profit—MR=MC; in monopoly market P>MC ---inefficient market----P>MR in perfectly competitive market P=MC ---efficient market(P=MC=MR)
B Average total cost
A
Demand
1. The intersection of the marginal-revenue curve and the marginal-cost curve determines the profit-maximizing quantity . . .
•E <1
•Q
•TR
•P
Content
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13.1 Why Monopolies Arise 13.2 Production and Pricing Decisions 13.3 The Welfare Cost of Monopolies 13.4 Public Policy Toward Monopolies 13.5 Price Discrimination
Costs and Revenue Marginal cost Deadweight loss Monopoly price
Demand
Marginal revenue 0 Monopoly quantity Efficient quantity Quantity
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The Welfare Cost of Monopolies
Marginal revenue
The demand curve shows how the quantity affects the price of the good. The marginal-revenue curve shows how the firm’s revenue changes when the quantity increases by 1 unit. Because the price on all units sold must fall if the monopoly increases production, marginal revenue is always less than the price.
13.1 Why Monopolies Arise
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a monopoly firm is a price maker. it is the sole seller of its product. No close substitutes.
Outcome: often not the best for society

•P
•E>1 •E =1 •M R
•总收益曲线：先上升， 后下降 • Ed = 1时 MR=0 TR曲线的斜率为正，表示 TR达到极大值 • •Ed ＞1时 MR>0 TR曲线的斜率为正，表示 TR随产量的增加而增加 • •Ed ＜1 时 MR<0 TR曲线的斜率为正，表示 TR随产量的增加而减少 •Q
The Inefficiency of Monopoly
Costs and Revenue Marginal cost Monopolyue 0 Monopoly quantity Efficient quantity Quantity
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13.3 The Welfare Cost of Monopolies
Competitive firm One producer of many Price taker Demand is a horizontal line (Price) Sells as much or as little at same price
Demand Curves for Competitive and Monopoly Firms
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Monopoly - higher profit Bigger producer surplus Smaller consumer surplus Social loss = Deadweight loss From the inefficiently low quantity of output Triangle between the demand curve and MC curve The deadweight loss caused by a monopoly is similar to the deadweight loss caused by a tax. The difference between the two cases is that the government gets the revenue from a tax, whereas a private firm gets the monopoly profit.
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Profit Maximization for a Monopoly
Costs and Revenue
2. . . . and then the demand curve shows the price consistent with this quantity.
Marginal cost
Monopoly price
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Production and Pricing Decisions
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Profit maximization
Perfect
competition: P=MR=MC Monopoly: P>MR=MC

A monopoly’s profit
Profit
= TR – TC = (P – ATC) ˣ Q