Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

CHAPTER 9
Price and Output
Under Pure Monopoly
9.1 PURE MONOPOLY DEFINED
Pure monopoly is the form of market organization in which there is a single firm selling a commodity for
which there are no close substitutes. Thus the firm is the industry and faces the negatively sloped industry
demand curve for the commodity. As a result, in order to sell more of the commodity, the monopolist must
lower its price. Thus for a monopolist, MR , P and the MR curve lies below the D curve.
EXAMPLE 1. In Table 9.1, columns (1) and (2) give the demand schedule faced by the monopolist. The TR values of
column (3) are obtained by multiplying each value of column (1) by the corresponding value in column (2). The MR
values of column (4) are obtained from the difference between successive TR values. Because of this, the MR values of
column (4) should have been recorded half way between successive levels of TR and sales. However, this was not done
(1)
P ($)
(2)
Q
Table 9.1
(3)
TR ($)
(4)
MR ($)
8.00 0 0 . .
7.00 1 7.00 7
6.00 2 12.00 5
5.50 2.5 13.75 (3)
5.50 3 15.00 3
4.00 4 16.00 1
3.00 5 15.00 21
2.00 6 12.00 23
1.00 7 7.00 25
0 8 0 27
Fig. 9-1
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