1. CHAPTER 6 MARKET STRUCTURE: MONOPOLY

9. For a monopolist, an increase in output involves not just producing more and selling it, but also reducing the price of its output to sell it. TABLE 13.1 Marginal Revenue Facing a Monopolist (1) QUANTITY (2) PRICE (3) TOTAL REVENUE (4) MARGINAL REVENUE 0 $11 0  1 10 $10 $10 2 9 18 8 3 8 24 6 4 7 28 4 5 6 30 2 6 5 30 0 7 4 28  2 8 3 24  4 9 2 18  6 10 1 10  8

10. FIGURE 13.3 Marginal Revenue Curve Facing by Monopolist

12. (b) Total Revenue $60,000 0 16 32 Total revenue $3,750 0 16 32 Marginal revenue Elastic (Ed > 1) Inelastic (Ed < 1) Unit elastic (Ed =1) D = Average revenue 1-carat diamonds per day (a) Demand and Marginal Revenue $ per diamond Dollars 1-carat diamonds per day Demand Curve and Elasticity of Demand ↓ Inelastic -ve Maximum Unitary Elastic 0 ↑ Elastic +ve TR PED MR

21. Misconception Monopolist CAN earn positive economic profit in the long run. Monopolist seek to maximize PROFIT . Monopolist has BOTH good and bad to the market/society. Monopolist ALWAYS earn positive economic profit in the long run. Monopolist seek to maximize PRICE . Monopolist ALWAYS bad to the market/society. True Wrong

23. Deadweight Loss A B C D E

24. Try this!! Deadweight Loss???? Producer Surplus Total Surplus Consumer Surplus Changes Monopoly Perfect Competitive

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