CHAPTER 9 IMPERFECT COMPETATION AND MONO

IMPERFECT COMPETATION AND
MONOPOLY
ECONOMICS
Paul A. Samuelson and William D.Nordhaus
18th Edition, McGraw-Hill, 2005,
Chapter 9
Basic
Microeconomics/PAS&WDR/SamHa
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Part 2 :
Microeconomics: Supply, Demand and Product Markets
CHAPTER 9 : IMPERFECT COMPETATION AND MONOPOLY




Imperfect Competation
prevails in an industry whenever individual
sellers have some measure of control over the
price of their output.
Varieties of Imperfect Competation
 Monopoly
 Oligopoly
 Monopolistic Competation
Basic
Microeconomics/PAS&WDR/SamHa
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Part 2 :
Microeconomics : Supply, Demand and Product Markets
CHAPTER 9 : IMPERFECT COMPETATION AND MONOPOLY
Marginal Revenue


is the change in revenue that is generated by an
additional unit of sales.
Q

Price

TR

MR

2

160

320

xxx

3

140

420

100

4

120

480

60

5

100

500

20

6

80

480

-20

7

60

420

-60

Basic
Microeconomics/PAS&WDR/SamHa
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Part 2 :
Microeconomics : Supply, Demand and Product Markets
CHAPTER 9 : IMPERFECT COMPETATION AND MONOPOLY

Marginal Revenue  Graph
Price

Price

Ed = 1
Ed > 1  MR > 0
Ed = 1  MR = 0

Ed < 1
Ed > 1

Ed < 1  MR < 0
MR = 0

AR

TR
Quantity

Basic
Microeconomics/PAS&WDR/SamHa
rtojo/2005

MR

Quantity

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Part 2 :
Microeconomics : Suplly, Demand and Product Markets
CHAPTER 9 : IMPERFECT COMPETATION AND MONOPOLY

PROFIT – MAXIMIZING CONDITION
 Maximum profit will occur when output is at that
level where the firm’s marginal revenue is equal
to its marginal cost
 Marginal Revenue = Marginal Cost

MR = MC  dTR/dQ = dTC/dQ
Basic
Microeconomics/PAS&WDR/SamHa
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Part 2 :
Microeconomics: Supply, Demand and Product Markets
CHAPTER 9 : IMPERFECT COMPETATION AND MONOPOLY
SUMMARY OF FIRM’S MAXIMUM PROFIT
Q

Price

TR

TC

Total
Profit

MR

MC

0

200

0

145

-145

xxx

xxx

1

180

180

175

5

180

30

2

160

320

200

120

140

25

3

140

420

220

200

100

20

4

120

480

250

230

60

30

40

40

5

100

500

300

200

20

50

6

80

480

370

110

-20

70

7

60

420

460

-40

-60

90

8

40

320

570

-250

-100

100

Basic
Microeconomics/PAS&WDR/SamHa
rtojo/2005

MR = MC

MR = MC

MR = MC

6


Monopolistic Competitor Making a Profit in the
Short Run
24
MC
22
20
18

Price is $15

ATC

16
14

ATC is $12.10

D

12

MR

10

Total Profit=(Price-ATC) X Output
=($15-$12.10) X 60
=($2.90) X 60

8
6
4

= $174
2
0

0

10

20

30

40

50

60

70

80

90

100 120 140 160

Output

Output is 60

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

24-6


Monopolistic Competitor Taking a Loss in the
Short Run

24
MC
22
20
18

ATC

16
14

ATC is $12.80
Price is $11

12
10
8

Total Profit=(Price-ATC) X Output
6

=($11-$12.80) X 42
=(-$1.80) X 42

D

4
MR

2

= -$75.60
0

0

10

20

30

40

50

60

70

80

90

100 120 140 160

Output

Output is 42

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

24-7


Monopolistic Competitor Breaking Even in the
Long Run
24
MC
22
20
18

At the output level
associated with MC=MR,
the ATC curve is tangent
to the demand curve

ATC

16
14
12
10
8
6

D

4

2
MR
0

0

10

20

30

40

50

60

70

80

90

100

120 140 160

Output

Output is 40

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

24-8


Part 2 :
Microeconomics: Supply, Demand and Product Markets
CHAPTER 9 : IMPERFECT COMPETATION AND MONOPOLY

PROFIT MAXIMIZATION :
Price

MC

P**

AC

AC
AR
MR
Q**
Basic
Microeconomics/PAS&WDR/SamHa
rtojo/2005

Quantity

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Part 2 :
Microeconomics: Supply, Demand and Product Markets
CHAPTER 9 : IMPERFECT COMPETATION AND MONOPOLY
PROFIT MAXIMIZING : GRAPH
TR, TC

AC

TR
Q**

Quantity

Basic
Microeconomics/PAS&WDR/SamHa
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11


Q and D Chapter 9
due-date :

Thank You

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Microeconomics/PAS&WDR/SamHa

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