00:01
So let's refresh first of our memory about what monopolist does.
00:03
The monopolist wants to set marginal revenue equal to marginal cost, right? they want to keep producing units until the marginal revenue of one more unit is just equal to the cost of production because that implies that they're maximizing profits, revenues minus costs.
00:19
Keep producing until the change in revenues no longer is greater than the change in costs.
00:24
Diagramatically, what does that look like? well, there's a demand curve.
00:28
There's a marginal cost curve, and there is a marginal revenue curve, right? and the firm's choice of quantity is defined by marginal revenue and marginal cost.
00:42
That choice of quantity, therefore, defines the monopolist's price, right? so the key thing is that this implies the monopolist quantity, which implies the monopolist price.
00:55
These two things are locked together, right, by the demand curve.
01:02
If i pick a quantity, the demand curve tells me the price, and if i pick a price, the demand curve tells me what quantity will support that price...