Intermediate Microeconomics · free preview
The Monopolist's Problem
A single seller faces the whole downward demand curve, its marginal revenue P times one plus one over e falling below price, and profit maximization at MR equal MC produces less and charges more than competition, Q 22 and P 56 against 44 and 12 in the worked market.
1. One seller, the whole curve
One seller, the whole curve
2. The solution
The solution
3. Sources of monopoly
Sources of monopoly
4. The deadweight ledger
The deadweight ledger
5. The MR construction
For demand P equals 100 minus 2Q, what is marginal revenue?
6. The solution
With MC of 12, what are the monopoly quantity and price?
7. The inelastic region
Why never price where demand is inelastic?
8. Monopoly's source
What explains the persistence of a monopoly against entry?
9. The markup
Compute the monopoly price 56 minus MC 12, and write the per-unit markup.
10. Elasticity at the solution
Compute the elasticity magnitude, one half times 56 over 22, and write it to two decimals.
11. The monopolist's haul
At the monopoly solution Q of 22 and p of 56 with MC of 12, what is the monopolist's profit?
12. What consumers keep
What is consumer surplus at the monopoly point, Q of 22 and p of 56?
13. The solution's signature
What does marginal revenue read at the monopoly quantity of 22?
14. The inverse-elasticity check
With elasticity 1.27 at the monopoly point, verify the Lerner markup formula.
15. The markup rectangle
At Q of 22 with markup 44 per unit, compute the monopolist's profit, and write the number.
16. Marginal revenue at the solution
For MR equal to 100 minus 4Q, compute MR at Q of 22, and write the number.
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