Monopolies

1
Monopolies
2
Calculate and plot the following
Quantity Price TR AR MR TC AC MC
1 100 - - - -
2 90 - - -
3 80 100 -
4 70 130
5 60 138
6 50 152
7 40 180
8 30 - 228
9 20 - 322
10 10 - 520
11 0 - 900
3
Calculate and plot the following
Quantity Price TR AR MR TC AC MC
1 100 100 - - - -
2 90 180 - - -
3 80 240 100 -
4 70 280 130
5 60 300 138
6 50 300 152
7 40 280 180
8 30 240 - 228
9 20 180 - 322
10 10 100 - 520
11 0 0 - 900
4
Calculate and plot the following
Quantity Price TR AR MR TC AC MC
1 100 100 100 - - - -
2 90 180 90 - - -
3 80 240 80 100 -
4 70 280 70 130
5 60 300 60 138
6 50 300 50 152
7 40 280 40 180
8 30 240 30 - 228
9 20 180 20 - 322
10 10 100 10 - 520
11 0 0 0 - 900
5
Calculate and plot the following
Quantity Price TR AR MR TC AC MC
1 100 100 100 - - - -
2 90 180 90 80 - - -
3 80 240 80 60 100 -
4 70 280 70 40 130
5 60 300 60 20 138
6 50 300 50 0 152
7 40 280 40 -20 180
8 30 240 30 - 228
9 20 180 20 - 322
10 10 100 10 - 520
11 0 0 0 - 900
6
Calculate and plot the following
Quantity Price TR AR MR TC AC MC
1 100 100 100 - - - -
2 90 180 90 80 - - -
3 80 240 80 60 100 33 -
4 70 280 70 40 130 33
5 60 300 60 20 138 28
6 50 300 50 0 152 25
7 40 280 40 -20 180 26
8 30 240 30 - 228 29
9 20 180 20 - 322 36
10 10 100 10 - 520 52
11 0 0 0 - 900 81.8
7
Calculate and plot the following
Quantity Price TR AR MR TC AC MC
1 100 100 100 - - - -
2 90 180 90 80 - - -
3 80 240 80 60 100 33 -
4 70 280 70 40 130 33 30
5 60 300 60 20 138 28 8
6 50 300 50 0 152 25 14
7 40 280 40 -20 180 26 28
8 30 240 30 - 228 29 48
9 20 180 20 - 322 36 94
10 10 100 10 - 520 52 198
11 0 0 0 - 900 81.8 380
8
Calculate and plot the following
9
Calculate and plot the following
10
Calculate and plot the following
11
Calculate and plot the following
12
Calculate and plot the following
13
MC
Abnormal Profit
Cost/Rev
AC
Perfectly competitive firms would produce here
Pm
MC cuts AC at its lowest point
D
Output is NOT at bottom of AC curve and so is
inefficient.
Profit Maximisation at MRMC
Quantity
Qm
MR
14
Implications of Monopolies

• Monopolies do not
• Operate at minimum AC productively inefficient
• Operate at PMC allocatively inefficient
• Monopolies will
• Reduce output and increase price

15
Implications of Monopolies

• Monopolies may
• Be x-inefficient (not operate on their cost
  curve)
• Provide poor customer service
• Exploit suppliers and consumers
• Engage in research and development (depending
  entry threat)

16
Consumer and Producer Surplus
Consumer Surplus
Price
Price
S
S
Pm
Producer Surplus
Ppc
D
D
Welfare Loss
Qpc
Qm
Quantity
Quantity