【正文】 ved items copyright 169。 2022 by Harcourt, Inc. A Monopoly’s Revenue ?Total Revenue P x Q = TR ?Average Revenue TR/Q = AR = P ?Marginal Revenue DTR/DQ = MR Harcourt, Inc. items and derived items copyright 169。 2022 by Harcourt, Inc. A Monopoly’s Marginal Revenue A monopolist’s marginal revenue is always less than the price of its good. ?The demand curve is downward sloping. ?When a monopoly drops the price to sell one more unit, the revenue received from previously sold units also decreases. Harcourt, Inc. items and derived items copyright 169。 2022 by Harcourt, Inc. Harcourt, Inc. items and derived items copyright 169。 2022 by Harcourt, Inc. Harcourt, Inc. items and derived items copyright 169。 2022 by Harcourt, Inc. A Monopoly’s Profit Profit equals total revenue minus total costs. Profit = TR TC Profit = (TR/Q TC/Q) x Q Profit = (P ATC) x Q The Monopolist’s Profit... Quantity 0 Costs and Revenue Demand Marginal cost Marginal revenue QMAX B Monopoly price E Average total cost D Average total cost C Harcourt, Inc. items and derived items copyright 169。 2022 by Harcourt, Inc. The Monopolist’s Profit The monopolist will receive economic profits as long as price is greater than average total cost. Harcourt, Inc. items and derived items copyright 169。 2022 by Harcourt, Inc. The Welfare Cost of Monopoly ?In contrast to a petitive firm, the monopoly charges a price above the marginal cost. ?From the standpoint of consumers, this high price makes monopoly undesirable. ?However, from the standpoint of the owners of the firm, the high price makes monopoly very desirable. Harcourt, Inc. items and derived items copyright 169。 2022 by Harcourt, Inc. The Deadweight Loss Because a monopoly sets its price above marginal cost, it places a wedge between the consumer’s willingness to pay and the producer’s cost. ?This wedge causes the quantity sold to fall short of the social optimum. The Inefficiency of Monopoly... Quantity 0 Demand Marginal revenue Marginal cost Monopoly price Deadweight loss Efficient quantity Monopoly quantity Price Harcourt, Inc. items and derived items copyright 169。 2022 by Harcourt, Inc. The Inefficiency of Monopoly The monopolist produces less than the socially efficient quantity of output. Harcourt, Inc. items and derived items copyright 169。 2022 by Harcourt, Inc. Public Policy Toward Monopolies Government responds to the problem of monopoly in one of four ways. ? Making monopolized industries more petitive. ? Regulating the behavior of monopolies. ? Turning some private monopolies into public enterprises. ? Doing nothing at all. Harcourt, Inc. items and derived items copyright 169。 2022 by Harcourt, Inc. Two Important Antitrust Laws ?Sherman Antitrust Act (1890) ?Reduced the market power of the large and powerful “trusts” of that time period. ?Clayton Act (1914) ?Strengthened the government’s powers and authorized private lawsuits. Harcourt, Inc. items and derived items copyright 169。 2022 by Harcourt, Inc. MarginalCost Pricing for a Natural Monopoly... Regulated price Quantity 0 Loss Price Demand Marginal cost Average total cost Average total cost Harcourt, Inc. items and derived items copyright 169。 2022 by Harcourt, Inc. Public Ownership Rather than regulating a natural monopoly that is run by a private firm, the government can run the monopoly itself. (. in the ., the government runs the Postal Service). Harcourt, Inc. items and derived items copyright 169。 2022 by Harcourt, Inc. Price Discr