1 / 14

University of Hawai‘i at Mānoa Department of Economics

University of Hawai‘i at Mānoa Department of Economics. ECON 130 (003): Principles of Economics (Micro) http://www2.hawaii.edu/~lindoj Gerard Russo Lecture #23 Tuesday, April 6, 2004. ANNOUNCEMENTS. LAST LECTURE Tuesday, May 4, 2004, 12:00-1:15 PM, BIL 152 Review Session

fedora
Télécharger la présentation

University of Hawai‘i at Mānoa Department of Economics

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. University of Hawai‘i at MānoaDepartment of Economics ECON 130 (003): Principles of Economics (Micro) http://www2.hawaii.edu/~lindoj Gerard Russo Lecture #23 Tuesday, April 6, 2004

  2. ANNOUNCEMENTS • LAST LECTURE • Tuesday, May 4, 2004, 12:00-1:15 PM, BIL 152 • Review Session • Thursday, May 6, 4:30-5:30 PM, BIL 152 • FINAL EXAMINATION • Thursday, May 13, 2004, 12:00-2:00 PM, BIL 152

  3. LECTURE 23 • Monopoly • Welfare Implications of Monopoly Pricing

  4. MONOPOLY • Monopoly • One Firm • Price Maker • Homogeneous Product • No Entry • The Monopolist’s Demand • Average Revenue • Total Revenue • Marginal Revenue

  5. Monopoly Profit Maximization • Marginal Revenue=Marginal Cost • MR=MC

  6. Monopoly Revenue • Inverse Demand: P=a – bQ • Price=Average Revenue • P=AR, Rule of one price. • AR=P=a – bQ • Total Revenue=TR=PQ=aQ – bQ2 • Marginal Revenue=MR=a – 2bQ

  7. $/Q Inverse Demand: AR=P=a-bQ MR=a-2bQ 0 $ Q TR=aQ-bQ2 0 Q

  8. $/Q elasticity = - infinity elasticity = -1 Inverse Demand: AR=P=a-bQ elasticity = 0 MR=a-2bQ 0 $ Q TR=aQ-bQ2 0 Q

  9. Profit Maximizing Monopolist (non-discriminating) $/Q Total revenue equals the area of rectangle 0P0fQ0. Total cost equals the area of rectangle 0cgQ0. Profit equals the area of rectangle cP0fg. MC ATC P0• • f AVC • g c• b• • h • j a• Demand 0 Q0 Q Marginal Revenue

  10. Are Economic Profits Positive, Negative or Zero? Shut-Down or Continue to Operate? $/Q MC ATC c• • f AVC • g P0• b• • h a• • j D 0 Q0 Q MR

  11. Are Economic Profits Positive, Negative or Zero? Shut-Down or Continue to Operate? $/Q ATC MC AVC D 0 Q MR

  12. Competition $/Q Gross Social Benefits = A + B Social Cost = B Net Social Benefits = A A PC LRS B D 0 QC Q

  13. Competition $/Q Gross Social Benefits = A+B+E+F+G+H+J+K Social Cost = H+J+K Net Social Benefits = A+B+E+F+G B A PM F E G LRS: LMC=LATC PC H K J D 0 QC QM Q MR

  14. Competition Gross Social Benefits = A+B+E+F+G+H+J+K Social Cost = H+J+K Net Social Benefits = A+B+E+F+G $/Q Monopoly Gross Social Benefits = A+B+E+F+H Social Cost = H Net Social Benefits = A+B+E+F B A PM F E G LRS: LMC=LATC PC H K J D 0 QC QM Q MR

More Related