Economies of scale as a cause of onon y Cost Average tota cost 0 H Inc items and derived items copyright C 2001 by Harcourt, Inc Quantity of output arc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Economies of Scale as a Cause of Monopoly... Average total cost Quantity of Output Cost 0
Monopoly versus Competition Monopoly ◆ Is the sole producer o Has a downward-sloping demand curve ◆ Is a price maker o Reduces price to increase sales H arc Inc. items and derived items c ht o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Monopoly versus Competition Monopoly uIs the sole producer uHas a downward-sloping demand curve uIs a price maker uReduces price to increase sales
Competition versus Monopoly Competitive Firm oIs one of many producers oHas a horizontal demand curve ◆ Is a price taker sElls as much or as little at same price H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Competition versus Monopoly Competitive Firm uIs one of many producers uHas a horizontal demand curve uIs a price taker uSells as much or as little at same price
Demand Curves for Competitive and Monopoly Firms. (aA competitive Firm's (b)A Monopolists Demand curve Demand curve Price Price Demand Demand Quantity of 0 Quantity of Output Output H arc Inc. items and derived items c ht o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Quantity of Output Demand (a) A Competitive Firm’s Demand Curve (b) A Monopolist’s Demand Curve 0 Price 0 Quantity of Output Price Demand Demand Curves for Competitive and Monopoly Firms
A Monopoly's Revenue ◆ Total revenue PXQ=TR ◆ Average revenue TR/Q=AR=P ◆ Marginal revenue ATRAQ=MR H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. A Monopoly’s Revenue uTotal Revenue P x Q = TR uAverage Revenue TR/Q = AR = P uMarginal Revenue DTR/DQ = MR