Identify  any concepts, or follow the instructions below (or both!) Hand-draw your graphs

Introduction: Monopolies don't produce based on the marginal cost curve since a monopoly doesn't have to worry about competition. Instead, monopolies produce based on their profit margin. So, in perfect competition P = MR, but in a monopoly, P > MR

Instructions: Answer: What are the 3 types of monopolies? Look up a graph of an economies of scale monopoly.Links to an external site. What do you notice? (hint: LRMC...) There are 4 types of market distortions. Using a table or some clear structure, show the differences or commonalities between each: Monopoly oligopoly monopolistic competition price discrimination *Hand draw a market in perfect competition (S as MC, D as MU) Draw equilibrium price as fixed Label the fixed line "P=MR" and label the graph "Perfect Competition" Label the axes (P&Q) Answer: Instead of MC = MU to determine price, how does a monopolistic firm set price? MC = what? *Draw a monopolistic firm that is maximizing profit Include MC, MU, and a downward sloping MR that is left of the MU curve Label the axes and label the graph "monopoly" Label on the y axis (p axis) at the points where MC=MU and call this "Pcompetition" or "Pc" instead of "Pequilibrium" Identify the point where MC=MR and draw a line from that point up to the MU curve (the demand curve) If you want, you can even label this point on the x axis as "Qm" If you want, you can label the point on the y axis where MC=MR Lastly, identify where Qm would touch the MU curve and label the point on the y axis "Pmonopoly" or "Pm" *you can put this graph and the one below next to each other. If you allow equilibrium price to line up because you draw the S/D curves the same this helps to visualize what is going on

Draw another graph of a monopolistic firm but only label Pm Include an "ATC" curve (it usually dips below the S/D equilibrium and then curves back up) (See your Assignment for a reminder on ATC) Label the point where the Qm point would cross the ATC on the y axis as "Patc" Shade in the rectangle.** This area is the profit Write the formula " = (P-ATC)Q" as the title of the graph -FYI, the rectangle under the "profit rectangle" is loss, a point at which a firm still produces. Under that rectangle a firm wouldn't produce (shutdown point) because they'd be following the MR curve and now MR < MC... ** the rectangle made by the 4 points: Patc/Pm/where Qm meets ATC/where Qm meets MU

Lastly, draw another graph of a monopolistic firm label Pcompetition (Pequilibrium) and draw a triangle to identify Consumer Surplus like we would for perfect competition (see your Assignment for a reminder on total surplus) Label the inside of the triangle "CS". Do we get all of the consumer surplus? Explain and/or show on the graph

Answer rating: 100% (QA)

Types of Monopolies 1 Natural Monopoly A market situation where one firm can produce the entire market output at a lower cost than multiple firms due ... View the full answer