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WCU Live Micro: Monopoly

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by

Thomas Andrews

on 6 December 2018

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Transcript of WCU Live Micro: Monopoly

Thomas P. Andrews
Microeconomics
Monopoly
Monopoly
Step 1:Long-run competitive equilibrium
S
1000
48
50,000
$2
Market
Monopolized Market: 5 steps
4. Adjust the PPC
2. Replace S with SRCD
Standard Monopoly
3. Add MR
Monopoly price
5. Compare monopoly to competition
Step 2: Replace S with SRCD
48,000
$2
Market
= one firm
Step 3: MR, Pm, Qm and Profit
50,000
2
MC
ATC
One firm Market
$50
25,000
MR
$30
20,000
Profit = (30-4)*20,000
= $720,000
Step 4: Adjust the PPC
Step 5: compare monopoly to competition
Practice
Step 1:LRCE
Natural Monopoly
2,000,000
Market
Step 2: Replace S with SRCD
1,000,000
Market
one firm
Step 3: MR, Pm, Qm and Profit
MC
ATC
One firm Market
1
2mil
MR
950,000
Profit
.52
Profit = (.52-.32)*950,000
= $190,000/day!
Step 4: Adjust the PPC
Step 5: monopoly to competition (regulation)
2,000,000
.32
Pr
Regulate!
Regulate!
http://qlikview.telogical.com/QvAJAXZfc/opendoc.htm?document=Pricing%20Trends_Beta.qvw&ticket=0208BA8CEAAE8C6444A2C52CC1663D35C70BC74F
Monopoly
One Seller
No close
subtitute

Barriers
S
Monopoly quantity
Monopoly profit
ATC
S
1000
MC
1. Long-run competitive equilibrium
S=D
P= Minimum ATC
on PPC
Market
Firm
PPC
D
AFC
AVC=MC
ATC
AFC
MC=AVC
ATC
Examples
LRCE

Replace S with SRCD
Add MR, PM, QM
Compare Monopoly and competition
Adjust PPC
Cabo v
Pureta vallarta
http://www.cc.com/video-clips/d9x5mh/the-colbert-report-jell-o-tampering
Cable TV
Tap Water
Fixed v. variable
http://www.wikinvest.com/stock/Comcast_(CMCSA)/Data/Gross_Profit/2015/Q4?ref=chart
ATC
MC
Cab rides
Cab rides
$4
Cab Rides
Unemp
DWL
CS
Profit
$50
CS = 1/2($20)*20,000= $200,000
DWL = 1/2($28*28,000)=$392,000
A tale of two cities
$2
48000
$30
20000
Cabo Taxi market
50000
$50
Profit = (30-4)*20,000
= $720,000
CS = 1/2($50-$20)*20,000 = $200,000
DWL = 1/2($30-2)*28,000 =$392,000
$50
48,000
taxis
Q
0
1
2
3
4
5
P
5
4
3
2
1
0
5
5
0
0
TR
MR
Q
P
48
ATC
MC
Puerta Vallarta
Cabo
$2
48000
Puerto vallarta taxi market
50000
$50
CS = 1/2(48,000*48)=$1,152,000
Profit = $0
ATC
$4
MC
Price = $1.40
Quantity = 300 million boxes
Sugar Price = $0.01 /oz
Gelatine $.03/oz
$1
Tap Water
DubC
.005
Bottled water
Hand/Face Washing
outdoor watering
raw water
Equip
Bottled water
Tap Water
The Back-end
Syrup
Full transcript