第24章 垄断

(y) p(y)y c(y).
At the profit-maximizing output level y*
d(y) d p(y)y dc(y) 0
dy dy
dy
so, for y = y*,
d p(y)y dc(y) .
dy
dy
Profit-Maximization
$
R(y) = p(y)y
1
.
Monopolistic Pricing & Own-Price Elasticity of Demand
p(
y*)
1
k
1
.
E.g. if = -3 then p(y*) = 3k/2, and if = -2 then p(y*) = 2k. So as rises towards -1 the monopolist alters its output level to make the market price of its product to rise.
Notice
that,
since
MR(y*)
p(y*)1
1
k,
p(y*)1
1
0
1 1 0
Monopolistic Pricing & Own-Price Elasticity of Demand
Notice
that,
since
MR(y*)
p(y*)1
1
k,
p(y*)1
1
0
1 1 0
MC(y) = a + 2by
a
y* aa 2(b b)
y MR(y) = a - 2by
Profit-Maximization; An Example
$/output unit
a
p(y*) ab aa
2(b b)
a
p(y) = a - by
MC(y) = a + 2by
y* aa 2(b b)
yቤተ መጻሕፍቲ ባይዱ
Profit-Maximization
$
R(y) = p(y)y c(y)
y
Profit-Maximization
$
R(y) = p(y)y c(y)
y (y)
Profit-Maximization
$
R(y) = p(y)y c(y)
y* y
(y)
Profit-Maximization
$
R(y) = p(y)y c(y)
MR(y)
p(y)1
1
.
Suppose the monopolist’s marginal cost of production is constant, at $k/output unit. For a profit-maximum
MR(y*)
p(y*)1
1
k
which is
p(y*)
1
k
Marginal revenue is the rate-of-change of revenue as the output level y increases;
MR(y) d p(y)y p(y) y dp(y) .
dy
dy
dp(y)/dy is the slope of the market inverse demand function so dp(y)/dy < 0. Therefore
Monopolistic Pricing & Own-Price
Elasticity of Demand
MR(y) d p(y)y p(y) y dp(y)
dy
dy
p(y)1
y p(y)
dpd(yy) .
Monopolistic Pricing & Own-Price
Elasticity of Demand
Monopolistic Pricing & Own-Price Elasticity of Demand
Notice
that,
since
MR(y*)
p(y*)1
1
k,
p(y*)1
1
0
Monopolistic Pricing & Own-Price Elasticity of Demand
MR(y*) a 2by* a 2by* MC(y*)
and the profit-maximizing output level is
y* a a 2(b b)
causing the market price to be
p(y*) a by* a b a a . 2(b b)
Profit-Maximization; An Example
$/output unit
a p(y) = a - by
MC(y) = a + 2by a
y MR(y) = a - 2by
Profit-Maximization; An Example
$/output unit
a p(y) = a - by
MR(y) p(y) y dp(y) p(y) dy
for y > 0.
Marginal Revenue
E.g. if p(y) = a - by then R(y) = p(y)y = ay - by2
and so MR(y) = a - 2by < a - by = p(y) for y > 0.
That is,
1 1
Monopolistic Pricing & Own-Price Elasticity of Demand
Notice
that,
since
MR(y*)
p(y*)1
1
k,
p(y*)1
1
0
1 1 0
That is,
1 1
1.
Monopolistic Pricing & Own-Price Elasticity of Demand
MR(y*) a 2by* a 2by* MC(y*)
and the profit-maximizing output level is
y* a a 2(b b)
Profit-Maximization; An Example
At the profit-maximizing output level y*, MR(y*) = MC(y*). So if p(y) = a - by and if c(y) = F + ay + by2 then
MR(y*) a 2by* a 2by* MC(y*)
Profit-Maximization; An Example
At the profit-maximizing output level y*, MR(y*) = MC(y*). So if p(y) = a - by and if c(y) = F + ay + by2 then
Pure Monopoly
Suppose that the monopolist seeks to maximize its economic profit,
(y) p(y)y c(y).
What output level y* maximizes profit?
Profit-Maximization
Marginal Revenue
E.g. if p(y) = a - by then R(y) = p(y)y = ay - by2
and so MR(y) = a - 2by < a - by = p(y) for y > 0.
a p(y) = a - by
a/2b
a/b y MR(y) = a - 2by
MR(y) d p(y)y p(y) y dp(y)
dy
dy
p(y)1
y p(y)
dpd(yy) .
Own-price elasticity of demand is
p(y) dy y dp(y)
so MR(y) p(y)1 1.
Monopolistic Pricing & Own-Price Elasticity of Demand
$ Marginal Cost
c(y) = F + ay + by2
F $/output unit
a
y MC(y) = a + 2by y
Profit-Maximization; An Example
At the profit-maximizing output level y*, MR(y*) = MC(y*). So if p(y) = a - by and c(y) = F + ay + by2 then
MR(y) d p(y)y p(y) y dp(y)
dy
dy
p(y)1
y p(y)
dpd(yy) .
Own-price elasticity of demand is
p(y) dy y dp(y)
Monopolistic Pricing & Own-Price
Elasticity of Demand
Pure Monopoly
A monopolized market has a single seller. The monopolist’s demand curve is the (downward sloping) market demand curve. So the monopolist can alter the market price by adjusting its output level.