Chapter 11Slide 2Slide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Slide 14Slide 15Slide 16Slide 17Slide 18Slide 19Slide 20Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedChapter 11MonopolyJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights Reserved Figure 11.01a Average and Marginal RevenuePrice, p,$ per unitq q + 1Quantity, q, Units per yearp1(a) Competitive FirmDemand curveA BJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights Reserved Figure 11.01b Average and Marginal RevenueQ Q + 1Quantity, Q, Units per yearp1p2Price, p,$ per unit(b) MonopolyDemand curveA BCJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 11.02 Elasticity of Demand and Total, Average, and Marginal Revenuep, $ per unitDemand ( p = 24 – Q)Perfectly elasticPerfectlyinelasticElastic, < –1Inelastic, –1 < < 0 = –1p = –1Q = 1Q = 1MR = –2Q, Units per day24120 12 24MR = 24 – 2QJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedTable 11.01 Quantity, Price, Marginal Revenue, and Elasticity for the Linear Inverse Demand Curve p=24-QJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 11.03 Maximizing Profit121824861081446060 12 24R, , $0 126 24ACAVCeDemand = 60MCMRQ, Units per dayRevenue, RProfit, Q, Units per dayp, $ per unit(a) Monopolized Market(b) Profit, RevenueJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedTable 11.02 Elasticity of Demand, Price, and Marginal CostJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 11.04a Effects of a Shift of the Demandp, $ per unitQ, Units per yearp1p2Q2Q1(a) CompetitionMC, Supply curvee2e1D1D2Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 11.04b Effects of a Shift of the Demand CurveQ, Units per yearp1p2Q2Q1=p, $ per unit(b) MonopolyMCD1D2MR2MR1E2E1Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights Reserved = 18Figure 11.05 Deadweight Loss of Monopolyp, $ per unitDemandQ, Units per dayMRMCpc = 16B = $12D =$60C =$2E = $4MR = MC = 12A = $18pm24Qm = 6 Qc = 8 24120emecJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedApplication Deadweight Loss of the U.S. Postal Service p, ¢ perpiece of mailQm = 49.8 Qc = 60.4A = $2.22 billionB =$237 millionDemandQ, Billion pieces of third-class mail per yearpm = 16.7pc = 12.30Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedSolved Problem 11.1 p, $ per unitDemandQ, Units per dayMRMC1 (before tax)MC2 (after tax)p1 = 18DECFGBA = $808p2 = 2024Q2 = 4 Q1= 6 2412e1e2Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 11.06 Ad Valorem Versus Specific Taxp, $ per unitABBefore-taxdemand, DQ, Units per yearMRMCe1e2p2p1pa = (1 – )p2ps = p2 – Q2Q1MRaDaMRsDsJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 11.07 Natural Monopoly1520401060 12 15AC = 10 + 60/QMC = 10Q, Units per dayAC, MC,$ per unitJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedApplication Electric Power Utilities 4.855.104.79Cost, $ perthousand kWh0 33 66Q, Billion kWh per yearACDJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedApplication A Drug Patent p, ¢ perdaily dose1.30 2.61 2.75A ≈ $0.44 millionC ≈ $0.44 millionB ≈ $0.88 millionDemandQ, Million daily doses of Tagamet75.07.50emecMC = AVCMR143.0Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 11.08 Optimal Price Regulationp, $ per unitRegulated demandMarket demandQ, Units per day2412860MRMRrMC182416DECBAemeoJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedSolved Problem 11.3 p, $ per unitRegulated demandMarket demandQ, Units per dayMRMRMCp1DECBAp2Q2Q1Qde1e2Excess demandrJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 11.09 Regulating an Electric Utilityp, Yen (¥) perhundred KWH31230 34 54ABDemandQ, Billion kWh per year30.326.922.321.919.5MRACMC53e1e2e3Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 11.10 Dominant Firm-Competitive Fringe Equilibriump, $ per unitQ, Units of output per
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