Analysis of monopoly.
w
Firm’s demand curve
is
the market demand curve.
$/Q
Q/t
D=AR
w
MR falls faster than demand.
P
1
Q
1
P
2
Q
2
w
Why?
Suppose monopolist lowers price.
Gain in revenue from
attracting new customers.
Loss in revenue from
lowering price to existing
(
inframarginal
) customers.
No price
discrimination.
