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Page 161

1. Page 161. Case #1 : Monopsonist in input purchasing and Monopolist seller of product Equilibrium: MRP=MIC at Pt A Pricing off input supply curve gives Q MM and P MM at B. MIC. Supply of Input. A. $ per unit of input.

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  1. 1 Page 161

  2. Case #1: Monopsonist in input purchasing and Monopolist seller of product • Equilibrium: MRP=MIC at Pt A • Pricing off input supply curve gives QMM and PMM at B MIC Supply of Input A $ per unit of input Note: Use MR not output price (PY) due to being a monopolist (I don’t display the MVP curve) PMM B MRP=MR x MPP QMM Amount of Input Purchased 2 Page 161

  3. Case #2: Perfect Competition in input purchasing andMonopoly seller • Equilibrium is where MRP=Input price, PPCM • No Marginal Input Cost curve → QPCM and PPCM Input price determined by input market (take input price as given $ per unit of input PPCM MRP=MR x MPP QMM 3 Amount of Input Purchased Page 161

  4. Case #3: Monopsony in input purchasing and Perfectly Competitive seller • Equilibrium: MVP=MIC at Pt. E • Pricing off supply curve → QMPC and PMPC at Pt. D MIC E Supply of Input $ per unit of input PMPC D MVP=PY x MPP We use MVP instead of MRP curve given P.C. seller QMPC 4 Amount of Input Purchased Page 161

  5. Case #4: Perfect Competition in both input purchasing and product sales • Equilibrium: MVP=Input Price at Pt. F • → QPC and PPC MVP=PY x MPP Input price determined by input market $ per unit of input PPC QPC 5 Amount of Input Purchased Page 161

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