Monopolist Action Q

A monopolist will: A. earn economic profits all the time. B. maximize the average profit per unit sold. C. Charge the highest price per item. D. sell at the output level where marginal revenue equals marginal cost (MR=MC) enjoy.

D Market equilibrium is always MR=MC doesnt matter if it is monopoly or perfect competition

D

and charge a price using the demand curve

D is right Proof: P=R-C Max P MP=MR-MC=0 <=>MR=MC & dMP ---- <0 dx <=> R’’

DDDDDDD

cfaisok Wrote: ------------------------------------------------------- > D is right > > > > Proof: > > P=R-C > > Max P > MP=MR-MC=0 > <=>MR=MC > I love this technical proof cfaisok! Well done > > & > > dMP > ---- <0 > dx > > <=> > R’’

Why doesn’t it charge the highest price per item? Isn’t this what a monpoloist seeks to achieve? Why would it not charge the highest price possible, if it can get away with it legally?

because highest price does not always equal greatest profits monopolists want to max profits, not price

because it can maximize profits by charging different prices to different customers, for the same good

Dreary Wrote: ------------------------------------------------------- > Why doesn’t it charge the highest price per item? > Isn’t this what a monpoloist seeks to achieve? > Why would it not charge the highest price > possible, if it can get away with it legally? Because in this case the people able to buy the product will decrease, hence less quantity produced but at the same time the company still has to pay high fixed costs for the machinery and all the other stuff…

Well done getterdone on explaining the second part of the question. cfaisok, micro econ is when good quant comes in handy - good proof. strangedays, always the first to attack the problem, good answer. map1, shake off that price discrimination stuff rubbed off on you by cfaisok :-0

no one is rubbing anything against me:))

Dreary Wrote: ------------------------------------------------------- > Why doesn’t it charge the highest price per item? > Isn’t this what a monpoloist seeks to achieve? > Why would it not charge the highest price > possible, if it can get away with it legally? this is perfect price discrimination it’s possible but it takes too much effort to figure out the highest price

<> think about it – if Microsoft, which has a monopoly on OS – chargest the highest, would you still buy it? No. The monopolist has to find the “right” price point. They want profits!!! not price maxing!

Dreary, i like your pedagogical means… You should become teacher or educator. I mean you always (most of the time) give positive feedback, even if somebody tackles you. Nice your positive thinking. That’s something i still have to learn…

heha168 Wrote: ------------------------------------------------------- > Dreary Wrote: > -------------------------------------------------- > ----- > > Why doesn’t it charge the highest price per > item? > > Isn’t this what a monpoloist seeks to achieve? > > Why would it not charge the highest price > > possible, if it can get away with it legally? > > > this is perfect price discrimination > it’s possible but it takes too much effort to > figure out the highest price @dreary: good question :wink: @heha good answer :wink: @map and me nice topic this price discrimination

and map: I won’t rubb you :wink:

Cheers cfaisok…

MR = MC, when in doubt, pick this answer.