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DECISION MAKING PROCESS: The five step decision making process the consumer uses to complete a purchasing decision. Step one is defining the problem. Step two is collecting data on possible choices. Step three is evaluating the alternatives. Step four is making a decision. Step five is post-purchase behavior, sometimes buyerÕs remorse.
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Lesson 18: Monopoly | Unit 3: Output
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Page: 20 of 30
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- A third graphical method of analyzing short-run output for a monopoly can be had with the marginal revenue and marginal cost curves.
- Average Revenue (AR): Because the firm is a monopoly, this average revenue curve is the market demand curve, which is negative sloped due to the law of demand.
- Marginal Revenue (MR): Because the monopoly is a price maker, this marginal revenue curve is a negatively-sloped line, and it lies beneath the average revenue (market demand) curve.
- Marginal Cost (MC): The marginal cost curve is U-shaped, reflecting the principles of short-run production.
- Profit Maximization: Profit is maximized at the quantity of output found at the intersection of the marginal revenue and marginal cost curves, which is 6 units.
- Price: The price is found by extending the 6-unit quantity up to the average revenue curve, which is the market demand. Buyers are willing to pay $7.50 per unit if 6 units are sold.
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PRICE CEILING A legally established maximum price that is imposed on a market BELOW the price that otherwise would be achieved in equilibrium. A price ceiling is placed on a market with the goal of keeping the price low, presumably based on the notion that the equilibrium price is too high. If imposed on a competitive market free of market failures, a price ceiling creates a shortage, or excess demand.
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BEIGE MUNDORTLE
[What's This?]
Today, you are likely to spend a great deal of time going from convenience store to convenience store hoping to buy either blue cotton balls or a genuine down-filled pillow. Be on the lookout for celebrities who speak directly to you through your television.
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This isn't me! What am I?
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Lewis Carroll, the author of Alice in Wonderland, was the pseudonym of Charles Dodgson, an accomplished mathematician and economist.
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"Sometimes when you innovate, you make mistakes. It is best to admit them quickly and get on with improving your other innovations. " -- Steve Jobs, Apple Computer founder
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NZFOE
New Zealand Futures and Options Exchange
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