Review of Chapter 8: Monopoly

Economic reasoning

1. AR=P, MR<P.
2. At the profit maximizing Qm, Pm>MR=MC.
3. A monopolist has no supply curve. It must use both market demand curve and
marginal cost curve to determine quantity supplied.
4. At the monopoly solution, Pm=MB>MR=MC, hence MB>MC, social surplus is
not maximized.
5. Understand cartel profit maximization: MR=MCA=MCB

Graphical Skills:
1. Identify and calculate CS, π, and DWL with for a constant MC firm.

Problem Solving Skills:

1. To produce a given level of Q in the least cost way, two firms of a cartel would
produce the good with MCA=MCB.
2. Profit maximization of a cartel requires MR= MCA=MCB: output produced by
each firm, market price and profits.