How to determine optimal output and price level?
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12-14-2012, 04:00 PM
Post: #1
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How to determine optimal output and price level?
Plus social welfare in a monopolistic market?
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12-14-2012, 04:08 PM
Post: #2
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Optimal output and price are where marginal cost equals marginal benefit; or, if they can be exactly equal, where they are as close as possible without marginal cost exceeding marginal benefit.
In a monopolistic market, there will be Pareto optimality if the monopolist is a perfect price discriminator (charging each buyer his or her reserve price). Otherwise, there will be a dead-weight loss. Ads |
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