February 2016
Beginner to intermediate
500 pages
33h 40m
English
All firms, including competitive firms and monopolies, maximize their profits by setting quantity such that marginal revenue equals marginal cost (Chapter 7). Chapter 6 demonstrates how to derive a marginal cost curve. We now derive the monopoly’s marginal revenue curve and then use the marginal revenue and marginal cost curves to examine how the manager of a monopoly sets quantity to maximize profit.
A firm’s marginal revenue curve depends on its demand curve. We will show that a monopoly’s marginal revenue curve lies below its demand curve at any positive quantity because its demand curve is downward sloping.
A firm’s demand curve shows the price, p, it receives for ...