Econ 1201 1st EditionLecture 9Outline of Previous Lecture – Perfect Competition III. Perfect Competition in the short run (making profit, losing, breaking even, shut down)II. Perfect Competition in the long run (how does short run competition graph change?)Outline of Current Lecture – Monopoly I. AssumptionsII. Profit Maximization and Losses in the Short RunIII. Special Case (price discrimination)Current LectureI. Assumptions1. Barriers to entry (ex. license, patent, control of resources, economies of scale)2. One seller (Mono- and poly – Latin words)3. Does not have a close substituteImplication: price maker, possible long run profit* notice that in the graph the Marginal Revenue curve is much steeper than the demand curve and twice as long *II. Short Run Profit Maximization (see graph from above)These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- the demand curve should be drawn in above the Average Total Cost minimum- q0 is where profit is being maximizedShort Run Loss(See right side of graph from above) – the cost is higher than the price- The firm is losing money but still running - Demand curve should not be drawn below the Average Variable CostAllocative Efficiency: MB = MC MB = demand curve* the combination of the consumer and producer net loss of surplus is the deadweight lossIII. Special CasePrice Discrimination: charging different people different prices for the same product Ex. Business tickets are more expensive than family tickets because families buy them in advance. Businesses tend to buy tickets much closer to the day they need to fly so buying tickets for same day flights would be more expensive than for ones purchased 3 months in advance.(Focus on the right graph for price
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