ECON 1B03 Lecture Notes - Lecture 9: Monopoly Profit, Market Segmentation, Demand Curve
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ECON 1B03 Full Course Notes
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Firms are price setters: the only seller of a product, does(cid:374)"t ha(cid:448)e su(cid:271)stitutes. Firm owns a key resource: ca(cid:374)"t (cid:271)e a(cid:272)(cid:272)essed (cid:271)y othe(cid:396) fi(cid:396)(cid:373)s. Government gives one firm exclusive rights: e. g. Industry is a natural monopoly: when a firm has increasing returns to scale, allows them to supplies goods at a lower cost than other firms, operates on the downward sloping part of atc curve. Monopoly by good management: existing firms drive out competition. The market demand curve is the firms demand curve: because they are the only seller in a market. Mr curve lies below the demand curve: to sell more they have to lower the p, so mr is always less than p. It then uses the demand curve to find the price that will induce consumers to buy that quantity. A monopoly maximizes profit by producing q where mr = mc. Monopoly profit is de(cid:396)i(cid:448)ed the sa(cid:373)e (cid:449)ay as pe(cid:396)fe(cid:272)t (cid:272)o(cid:373)petitio(cid:374) p(cid:396)ofit (cid:894)o(cid:396) a(cid:374)y fi(cid:396)(cid:373)"s p(cid:396)ofit(cid:895)