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Managerial Economics and Strategy, 2/e
book

Managerial Economics and Strategy, 2/e

by Jeffrey M. Perloff, James A. Brander
February 2016
Beginner to intermediate content levelBeginner to intermediate
500 pages
33h 40m
English
Pearson
Content preview from Managerial Economics and Strategy, 2/e

9.2 Market Power

A monopoly has market power, which is the ability to significantly affect the market price. In contrast, no single competitive firm can significantly affect the market price.

A profit-maximizing monopoly charges a price that exceeds its marginal cost. The extent to which the monopoly price exceeds marginal cost depends on the shape of the demand curve.

Market Power and the Shape of the Demand Curve

If the monopoly faces a highly elastic—nearly flat—demand curve at the profit-maximizing quantity, it would lose substantial sales if it raised its price by even a small amount. Conversely, if the demand curve is not very elastic (relatively steep) at that quantity, the monopoly would lose fewer sales from raising its price by the ...

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Publisher Resources

ISBN: 9780134472553