written by Daurie Augostine

-- written by Daurie Augostine



Monday, February 22, 2010

Monopoly --- Downward-sloping Demand Curve

Recall that in perfect competition, the demand curve in the industy is downward-sloping, but for the firm(s), the demand curve is horizontal. Do you remember why?

In any case, since the monopolist is the only firm in the industry, the firm's demand curve = the industry's demand curve and that demand curve is downward-sloping.

It's important to understand that the MR curve will lie below the demand curve and is also downward-sloping. To show the value of MR, complete the following hypothetical example:

Suppose P = $10, 9, 8, 7, 6, 5, 4
and Q = 2, 4, 6, 8, 10, 12, 14

Find TR. Find MR. Is it true that P > MR?