Compared to perfect competition a monopoly will produce ...

Compared to perfect competition, a monopoly will produce ________ output, and charge a ________ price. Select one: a. more; higher b. more; lower c. less; higher d. less; lower If different markets for a product produced by a monopolist can be separated and if the elasticity of demand differs between the two markets, then the monopolist will Select one: a. be able to make higher profits by using price discrimination. b. charge a single price in all markets. c. go out of business. d. sell the product in only one of the markets with inelastic demand curves.

Transcript

00:01 So the fundamental difference between competition and monopoly is the choice of where to produce.

00:05 Competition, people produce at price is equal to marginal cost.

00:10 If price was greater than marginal cost, there would be excess profits and people would enter the industry driving down the prices.

00:16 They increased quantity.

00:17 The monopolist produces at marginal revenue equals to marginal cost.

00:22 They internalize this idea that every unit i produce is going to reduce the price.

00:30 Hurts me directly whereas in the competitive firm every unit does not hurt the price because as one competitive firm i'm a small fish in a big ocean right graphically if i draw that as price versus quantity some demand curve some marginal cost curve right the competitive quantity has got to be out here they set the price equal to the marginal cost but the monopolist has this thing called marginal revenue right and marginal revenue incorporates this idea that i produce one more, i get the price, but then i lower the price ever so slightly on all the other units.

01:07 So the marginal revenue is always lower than the demand curve because it's not the price, it's the price minus the cost of lowering the price on the other units.

01:16 That is consistent with some quantity monopoly and some price.

01:21 So for a, we see that the price of the monopolist is higher because the quantity is and that should be very intuitive, right? the monopolist wants to restrict the quantity artificially to drive up the price, right? in competition, so much gets produced that the price gets driven down to cost.

01:40 Monopoulos wants to limit the quantity artificially to drive up the price, and they earn profits...

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