ECN 102 Lecture Notes - Lecture 26: Demand Curve, Deadweight Loss, Marginal Cost
Document Summary
Profit-maximization: the profit-maximizing is where mr = mc, find p from the demand curve at this q. As with a competitive firm, the monopolist"s profit equals (p atc) x q. A monopoly does not have an s curve. Has a supply curve that shows how its q depends on p. A monopoly firm is a price-maker, not a price-taker . Q does not depend on p; rather, q and p are jointly determined by mc, mr, and the demand curve. So there is no supply curve for monopoly. Patents on new drugs give a temporary monopoly to the seller. When the patent expires, the market becomes competitive, generics appear. Here, we assume constant marginal cost for simplicity. Pm and qm denote the monopoly price and quantity, respectively. Pc and qc denote the competitive price and quantity, respectively. P = mc and total surplus is maximized.
