Firm is earning 0 profit, the firm is covering all costs Industries w/ high fixed costs and low marg. costs
bundle MR=MC FOR ALL FIRMS
Garage space used for
baking that can no longe △A0F=Consumer Surplus
be rented = implicit ▢AFBG= Total Rev
expense F = Monopolist profit max
Supplies like sugar,
butter, pans = explicit
expense
Marginal costs and productivity are inversely related More elastic
Minimum Average Variable Cost = marginal cost = lower price,
curve and average variable cost curve intersect less elastic =
higher price
Output 8 9 Imperfect
price
Total Cost 280 340
discriminatio
(340−280) n = senior
Marginal Cost of 9th unit = (9−8)
= $60
discount
Demand decreases, price decreases, firms exit never
Shrink tho, supply decreases, price increases, & Arbitrage = Customer finds product at lower price and
market returns to long run equilibrium price sells in different market to make $$
Prisoner’s Dilemma=firms could do better if they both
Perfect Competition Monopoly
did opposite of what they choose to do
Many Sellers One Seller Left Right <--Coordinati Left Right
on Game
Many Substitutes Few Substitutes ↑ (3,3) (5,5) Prisoner's ↑ (3,3) (6,2)
Dilemma-->
Price Taker Price Setter ↓ (5,5) (1,1) ↓ (2,6) (5,5)
Network good = Utility of one customer depends on
MR=MC=D=Monopoly choice of other customer
Price Nash equilibrium = no player has incentive to
D=AC=Average Cost, unilaterally change strategies
D=MC=Marginal Cost Monopoly and Monopolistic competition both sell
Profit = P-AC*Q differentiated products resulting in ↓ sloping demand
curve and charge above marg. cost
Perfect Competition and Monopolistic Comp both
Natural Monopoly = faces high fixed cost & low
have many firms w/ low entry barriers and charge
marginal cost, average total cost curve slopes ↓, equal to average cost
single firm produce good cheaper than many small
firms (ex. Sewer, cable, subways) Monopolistic Competition (Constant cost
Monopoly maximize profits = price ﹥ marg. cost industry)
Monopolists charge higher markup when demand is
Short Run Long Run
inelastic
Gov. imposed = Tari on tea profit>0 (P<AC) profit=0
Economies of scale = Expensive to build amusement park but
Firms enter Firms exit
not to admit additional customer
Ownership of key input = Caribbean Cruz owns only Lower price P>MR Increase price w/ time
swimming pool on island
Human Capital - invest in edu & training to improve
Total Revenue = Price * Quantity worker’s productivity
bundle MR=MC FOR ALL FIRMS
Garage space used for
baking that can no longe △A0F=Consumer Surplus
be rented = implicit ▢AFBG= Total Rev
expense F = Monopolist profit max
Supplies like sugar,
butter, pans = explicit
expense
Marginal costs and productivity are inversely related More elastic
Minimum Average Variable Cost = marginal cost = lower price,
curve and average variable cost curve intersect less elastic =
higher price
Output 8 9 Imperfect
price
Total Cost 280 340
discriminatio
(340−280) n = senior
Marginal Cost of 9th unit = (9−8)
= $60
discount
Demand decreases, price decreases, firms exit never
Shrink tho, supply decreases, price increases, & Arbitrage = Customer finds product at lower price and
market returns to long run equilibrium price sells in different market to make $$
Prisoner’s Dilemma=firms could do better if they both
Perfect Competition Monopoly
did opposite of what they choose to do
Many Sellers One Seller Left Right <--Coordinati Left Right
on Game
Many Substitutes Few Substitutes ↑ (3,3) (5,5) Prisoner's ↑ (3,3) (6,2)
Dilemma-->
Price Taker Price Setter ↓ (5,5) (1,1) ↓ (2,6) (5,5)
Network good = Utility of one customer depends on
MR=MC=D=Monopoly choice of other customer
Price Nash equilibrium = no player has incentive to
D=AC=Average Cost, unilaterally change strategies
D=MC=Marginal Cost Monopoly and Monopolistic competition both sell
Profit = P-AC*Q differentiated products resulting in ↓ sloping demand
curve and charge above marg. cost
Perfect Competition and Monopolistic Comp both
Natural Monopoly = faces high fixed cost & low
have many firms w/ low entry barriers and charge
marginal cost, average total cost curve slopes ↓, equal to average cost
single firm produce good cheaper than many small
firms (ex. Sewer, cable, subways) Monopolistic Competition (Constant cost
Monopoly maximize profits = price ﹥ marg. cost industry)
Monopolists charge higher markup when demand is
Short Run Long Run
inelastic
Gov. imposed = Tari on tea profit>0 (P<AC) profit=0
Economies of scale = Expensive to build amusement park but
Firms enter Firms exit
not to admit additional customer
Ownership of key input = Caribbean Cruz owns only Lower price P>MR Increase price w/ time
swimming pool on island
Human Capital - invest in edu & training to improve
Total Revenue = Price * Quantity worker’s productivity
