1 / 7

AP Economics

AP Economics. Mr. Bernstein Module 61: Introduction to Monopoly November 25, 2013. AP Economics Mr. Bernstein. Monopoly vs. Perfect Competition Monopolist maximizes profit where MR=MC Perfectly Competitive firm also maximizes profit where MR=MC Monopolist sets price

rumor
Download Presentation

AP Economics

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. AP Economics Mr. Bernstein Module 61: Introduction to Monopoly November 25, 2013

  2. AP EconomicsMr. Bernstein Monopoly vs. Perfect Competition • Monopolist maximizes profit where MR=MC • Perfectly Competitive firm also maximizes profit where MR=MC • Monopolist sets price • Perfectly Competitive firm is a price taker • Monopolist has barriers to entry • Perfectly Competitive firms have free entry and exit • Monopolist has opportunity to earn profits in long run • Perfectly Competitive firm will earn zero profit in long run

  3. AP EconomicsMr. Bernstein Monopoly Demand and MR • Monopolist MR curve is below D curve because they must reduce price to sell more • Unlike perfect competition, DFIRM = DINDUSTRY

  4. AP EconomicsMr. Bernstein Monopoly Profit-Maximizing P and Q • As with perfect competition, p is maximized where MR=MC • Optimal Output Rule – Know the Concept, own the Concept!

  5. $ Profit = $12 Pm= $14 MC = ATC Pc = $10 D MR Qm= 3 Output AP EconomicsMr. Bernstein Monopoly Profit-Maximizing P and Q • Monopolies create inefficiencies; P>MC • Also notice Qm is lower than Qc would be (where D and MC Intersect)

  6. $ Profit = $12 Pm= $14 MC = ATC Pc = $10 D MR Qm= 3 Output AP EconomicsMr. Bernstein Monopoly Profit-Maximizing P and Q • With barriers to entry there are no new entrants and no adjustment to new equilibrium with zero economic profits at long-run equilibrium

  7. AP EconomicsMr. Bernstein Classic Monopoly Graph • Qm is found where MR=MC • But Pm is found by extending Qm vertically to D curve • Be sure you can find Monopolist’s p area

More Related