PADP 6950 Lecture Notes - Lecture 10: Marginal Revenue, Demand Curve, Market Power

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Barriers to entry: rm is a price-setter . If the rm charges a high price, they will only sell a small quantity (& vice versa) Demand curve facing monopoly: bc monopoly is only rm in the market, its demand curve is the market demand curve. Marginal revenue for a monopoly: marginal revenue (mr) > the change in total revenue from producing an additional unit. Mr = change in tr / change in q. Mr = p1 + q0 (p1 - p0) Change in tr = p1 + q0(p1 - p0: integration. Change in tr = p x (change in q) + q x (change in p) Mr = p + (change in p / change in q) x q: for a linear inverse demand curve, p = a - bq. (change in p) / (change in q) = - b. Mr = a - 2bq: marginal revenue curve for monopoly.

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