Pure Monopoly Suppose that the monopolist seeks to maximize its economic profit, II(y=p(yy-c(y). What output level y* maximizes profit?
Pure Monopoly Suppose that the monopolist seeks to maximize its economic profit, What output level y* maximizes profit? (y) = p(y)y − c(y)
Profit-Maximization II(y=p(yy-c(y) At the profit-maximizing output level y dyq(p(y)y、dcy dIi(y) d 0 dy So, for y=y", dy (p(yy)=dc(y) d d
Profit-Maximization (y) = p(y)y − c(y). At the profit-maximizing output level y* ( ) d y dy d dy p y y dc y dy ( ) ( ) ( ) = − = 0 so, for y = y*, ( ) d dy p y y dc y dy ( ) ( ) =
Profit-Maximization ROy=ply)y y
y $ R(y) = p(y)y Profit-Maximization
Profit-Maximization ROy=ply)y cly y
$ R(y) = p(y)y c(y) Profit-Maximization y
Profit-Maximization ROy=ply)y cly y Ily)
Profit-Maximization $ R(y) = p(y)y c(y) y (y)