ECO100Y5 Lecture Notes - Lecture 1: Average Variable Cost, Marginal Revenue, Demand Curve

• School: UTM
• Department: Economics
• Course: ECO100Y5
• Professor: Lee Bailey

Document Summary

Monopoly: a market containing a single firm. Monopolist: a firm that is the only seller in a market a monopolist faces a negatively sloped demand curve, unlike a perfectly competitive firm. Short-run profit maximizations rules about profit maximization: the firm should not produce at all unless price (average revenue) exceeds average. No supply curve for a monopolist a monopolist does not have a supply curve because it is not a price taker; it chooses its profit-maximizing price-quantity combination from among the possible combinations on the market demand curve. Competition and monopoly compared a monopolist restricts output below the competitive level and thus reduces the amount of economic surplus generated in the market; the monopolist creates an inefficient market outcome. Entry barriers and long-run equilibrium if the monopoly profits are to persist in the long run, the entry of new firms into the industry must be prevented.