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Firm Behavior in Monopolistic Markets

In: Workbook for Principles of Microeconomics

Author

Listed:
  • Martin Kolmar

    (University of St. Gallen)

  • Magnus Hoffmann

    (University of St. Gallen)

Abstract

1. The optimality condition “marginal costs = marginal revenues” characterizes the optimality condition only in a monopolistic but not in a perfectly competitive market. 2. Assume a non-price-discriminating monopolist who faces a decreasing demand function. Marginal revenues can be decomposed into a price and a quantity effect, and the price effect is always smaller than the quantity effect. 3. Assume a non-price-discriminating monopolist. Marginal revenues consist of a price and quantity effect. The price effect is always larger than the price effect under perfect competition. 4. If a firm owns a patent for a product, it can enforce prices above marginal costs, because the patent leads to a monopoly.

Suggested Citation

  • Martin Kolmar & Magnus Hoffmann, 2018. "Firm Behavior in Monopolistic Markets," Springer Texts in Business and Economics, in: Workbook for Principles of Microeconomics, chapter 10, pages 133-171, Springer.
    • Handle: RePEc:spr:sptchp:978-3-319-62662-8_10
    DOI: 10.1007/978-3-319-62662-8_10
    as

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