Activity – Monopoly Markets

Monopoly Markets

It has been argued that a monopoly does not produce a socially optimal output.

Watch the following video:

• https://www.youtube.com/watch?v=daxL1ZLrUzg (5.56 minutes)

After watching the following video attend the class and:

• Given the demand function as well as the cost function of the monopolist, calculate the profit maximizing price and quantity combination for the firm.
• Explain how marginal revenue of a monopolist is different from that of a perfectly competitive firm.
• Demonstrate monopolist’s above the marginal cost pricing.
• Given the average total cost of the monopolist, determine whether the firm is making a profit, loss, or is at break even.
• Discuss the concept of deadweight loss and non-socially optimum output for a monopoly firm.