lectures in microeconomics-charles w. upton monopoly versus competition
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![Page 1: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/1.jpg)
Lectures in Microeconomics-Charles W. Upton
Monopoly versus Competition
D
MCP*
Q*
MR
P**
Q**
DWL
CS
![Page 2: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/2.jpg)
Monopoly versus Competition
Comparison to Competitive Equilibrium
• A consumer sets
MRS=P
![Page 3: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/3.jpg)
Monopoly versus Competition
Comparison to Competitive Equilibrium
• A consumer sets
MRS=P• A competitive firm sets
MC = P
![Page 4: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/4.jpg)
Monopoly versus Competition
Comparison to Competitive Equilibrium
• A consumer sets
MRS=P
• A competitive firm sets
MC = P
• Of course,
MC = MRT
![Page 5: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/5.jpg)
Monopoly versus Competition
Comparison to Competitive Equilibrium
MRS = P
![Page 6: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/6.jpg)
Monopoly versus Competition
Comparison to Competitive Equilibrium
MRS = P = MC
![Page 7: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/7.jpg)
Monopoly versus Competition
Comparison to Competitive Equilibrium
MC = MRT
MRS = P = MC = MRT
![Page 8: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/8.jpg)
Monopoly versus Competition
Comparison to Competitive Equilibrium
MC = MRT
MRS = P = MC = MRTThe basic requirement for economic efficiency. The rate at which the consumer is willing to
substitute apples for bananas (say) is just equal to the rate at which we can transform apples into
bananas.
![Page 9: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/9.jpg)
Monopoly versus Competition
How the Monopolist Does It
MRS=P
MR=MC
![Page 10: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/10.jpg)
Monopoly versus Competition
How the Monopolist Does It
MRS=P
MR=MC
P > MR P> MC
![Page 11: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/11.jpg)
Monopoly versus Competition
How the Monopolist Does It
MRS=P
MR=MC
P > MR P> MC
MC=MRT
MRS>MRT
![Page 12: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/12.jpg)
Monopoly versus Competition
How the Monopolist Does It
MRS=P
MR=MC
P > MR P> MC
MC=MRT
MRS>MRT
The monopolist violates the fundamental requirement for economic
efficiency. Price is above Marginal Cost (MRT)
![Page 13: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/13.jpg)
Monopoly versus Competition
A Graphical Presentation
D
MCP*
Q*
![Page 14: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/14.jpg)
Monopoly versus Competition
A Graphical Presentation
D
MCP*
Q*
CS
![Page 15: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/15.jpg)
Monopoly versus Competition
A Graphical Presentation
D
MCP*
Q*
MR
P**
Q**
![Page 16: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/16.jpg)
Monopoly versus Competition
A Graphical Presentation
D
MCP*
Q*
MR
P**
Q**
CS
![Page 17: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/17.jpg)
Monopoly versus Competition
A Graphical Presentation
D
MCP*
Q*
MR
P**
Q**
CS
![Page 18: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/18.jpg)
Monopoly versus Competition
A Graphical Presentation
D
MCP*
Q*
MR
P**
Q**
DWL
CS
![Page 19: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/19.jpg)
Monopoly versus Competition
A Graphical Presentation
D
MCP*
Q*
MR
P**
Q**
DWL
CSThe social cost of a monopoly: the Dead
Weight Loss
![Page 20: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/20.jpg)
Monopoly versus Competition
A Graphical Presentation
D
MCP*
Q*
MR
P**
Q**
DWL
CSThe social cost of a monopoly: the Dead
Weight Loss
Suppose we could run the monopoly without any Dead Weight Loss?
Would monopolies then be objectionable?
![Page 21: Lectures in Microeconomics-Charles W. Upton Monopoly versus Competition](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649d5d5503460f94a3c875/html5/thumbnails/21.jpg)
Monopoly versus Competition
End
©2004 Charles W. Upton