ECO100Y5 Chapter Notes - Chapter 10: Transact, Arbitrage, Average Variable Cost
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ECO100Y5 Full Course Notes
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10. 1 a single price monopoly monopoly a market contains a single firm monopolist a firm that is the only seller in a market unlike a perfectly competitive firm, a monopolist faces a negatively sloped demand curve. Demand curve is negatively sloped price received for the extra unit sold is not the firm"s marginal revenue. Mr=p-(lost revenue) the monopolist"s marginal revenue is less than the price at which it sells its output. Thus the monopolist"s mr curve is below its demand curve. The firm should produce only if price (average revenue) exceeds average variable cost. If the firm does produce, it should produce a level of output such that marginal revenue equals marginal cost. Nothing guarantees that a monopolist will make positive profits in the short run, but if it suffers persistent losses, it will eventually go out of business. For a profit-maximising monopolist, price is greater than marginal cost.