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

228 PRICE AND OUTPUT UNDER PURE MONOPOLY [CHAP. 9
distribution of the five units of production between the two plants makes the monopolist’s STC greater and
profits smaller.
Fig. 9-16
9.13 In Fig. 9-16, D 1 and D 2 are two alternative D curves facing a monopolist. (a) Determine the monopolist’s
short-run equilibrium output and price with each alternative D curve. (b) Can you define the shortrun
supply curve of this monopolist? Explain.
(a)
(b)
The SMC curve intersects from below the MR 1 curve and the MR 2 curve at the same point, so that with either
D curve the best level of output for the monopolist is 2.5 units per time period. However, if the D curve facing
the monopolist is D 1 , this best level of output will be supplied at P 1 ¼ $5.50; with D 2 , the same (best) level of
output will be supplied at P 2 ¼ $6.75.
Since the same best level of output will be supplied at different prices, depending on the price elasticity and the
level of D, there is no unique relationship between quantity supplied and price. So we cannot define the shortrun
supply curve of the monopolist.
9.14 Two alternative D functions facing the monopolist are QD 1 ¼ 12 2 P and QD 2 ¼ 8 2 P/3. The monopolist
incurs an SMC of $1 to increase output from one to two units, an SMC of $3 to increase output
from two to three units, an SMC of $9 to increase output from three to four units, and an SMC of $18 to
increase output from four to five units, (a) At what price will the monopolist supply the best level of
output when D 1 is the demand curve? If D 2 is the demand curve? (b) Check your results by using
the formula MR ¼ P(1 2 1/e). (c) What can you say about the monopolist’s short-run supply curve?
(a) The monopolist will supply the short-run best level of output of three units at P 2 ¼ $15 with D 2 and at P 1 ¼ $9
with D 1 .
Fig. 9-17