16.2 Single-Price Monopoly

MyEconLab Concept Video

To understand how a single-price monopoly makes its output and price decisions, we must first study the link between price and marginal revenue.

Price and Marginal Revenue

Because in a monopoly there is only one firm, the demand for the firm’s output is the market demand. Let’s look at Bobbie’s Barbershop, the sole supplier of haircuts in Cairo, Nebraska. The table in Figure 16.2 shows the demand schedule for Bobbie’s haircuts. For example, at $12, consumers demand 4 haircuts an hour (row E).

Figure 16.2

Demand and Marginal Revenue

Table depicts the market demand, total revenue and marginal revenue at different prices for haircuts, and plots the same on the graph, depicting an example of total revenue loss and total revenue gain.

The table shows the market demand schedule for haircuts and ...

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