In all the previous example we have seen that the MC curve is going above the ATC curve as the quantity increases. Why is that not happening in 14:29 while calculating the pricing models for a monopoly? As I understand ATC comes down as the quantity increases and MC increases as the quantity increases.
Economic profit = Total revenue - Total economic costs Or Economic profit = Accounting profit - Total implicit opportunity costs Monopoly will earn zero economic profit at that point because price is set such that LRAC = AR IFT Support Team
Companies bid into an auction (tender) to become the monopoly provider of a service. The bid is a proposal on what price will be charged to consumers and often a set of outputs or quality of service standards that will be met. The right to be the monopoly provider is awarded to the lowest cost bidder, subject to meeting quality requirements. Retail outlets at rail stations and airports and concession outlets at stadiums are examples of government franchises. IFT Support Team
Why marginal cost taken as 1 instead of 4 in the example for consumer surplus, as opposed to example 3 of the curriculum where they have considered marginal cost of 2
If you calculate the area of the square (4x20), it is divided by 1/2 for the area of the triangle. That's the reason of the 1/2 on the surplus calculation.
Dear Abhinav, Yes, Marginal Cost (MC) can be greater than Average Total Cost (ATC). Typically, MC is lower than ATC for smaller quantities(mainly because of fixed costs) but as quantity increases ATC follows a downward trend; While MC follows a upward trend eventually ending up being greater than ATC. IFT Support Team
The profit-maximizing quantity will occur where MR = MC. A dotted line drawn straight up from the profit-maximizing quantity to the demand curve shows the profit-maximizing price.IFT support team
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In all the previous example we have seen that the MC curve is going above the ATC curve as the quantity increases. Why is that not happening in 14:29 while calculating the pricing models for a monopoly? As I understand ATC comes down as the quantity increases and MC increases as the quantity increases.
Hi, at 15:35 why is the Economic Profit instead of the Accounting Profit going to equal to 0, since there isn't opportunity cost involved? Thanks!
Economic profit = Total revenue - Total economic costs
Or Economic profit = Accounting profit - Total implicit opportunity costs
Monopoly will earn zero economic profit at that point because price is set such that LRAC = AR
IFT Support Team
How did you get the answer 40 to the last question?
how does bidding take place in monopoly and what is meant by bidding war?
Companies bid into an auction (tender) to become the monopoly provider of a service. The bid is a proposal on what price will be charged to consumers and often a set of outputs or quality of service standards that will be met. The right to be the monopoly provider is awarded to the lowest cost bidder, subject to meeting quality requirements. Retail outlets at rail stations and airports and concession outlets at stadiums are examples of government franchises.
IFT Support Team
Why marginal cost taken as 1 instead of 4 in the example for consumer surplus, as opposed to example 3 of the curriculum where they have considered marginal cost of 2
You are confusing demand curve equation with total cost equation. In example 3, notice that demand curve equation is provided.IFT Support Team
At 21:55 why the surplus area is 1/2, how was this calculated?
Thank you.
If you calculate the area of the square (4x20), it is divided by 1/2 for the area of the triangle. That's the reason of the 1/2 on the surplus calculation.
because the Area of a triangle = ½ *(Base) * (Height)
IFT support team
What do you mean by the curriculum here mentioned at 25:04? how can i access it
You need to read the CFA curriculum.
IFT support team
If we use E to calculate the optimal price,do we need to consider the sign of elasticity or just use the absolute value?
Dear 方古人,
We use absolute values.
IFT Support Team
Can marginal cost be greater than average total cost?
Dear Abhinav,
Yes, Marginal Cost (MC) can be greater than Average Total Cost (ATC). Typically, MC is lower than ATC for smaller quantities(mainly because of fixed costs) but as quantity increases ATC follows a downward trend; While MC follows a upward trend eventually ending up being greater than ATC.
IFT Support Team
Isn't the profit maximising price for a monopoly one with price that is unit elastic?
The profit-maximizing quantity will occur where MR = MC. A dotted line drawn straight up from the profit-maximizing quantity to the demand curve shows the profit-maximizing price.IFT support team
9:50 How the number 10 came in 750 -10Q =0 ?
take first derivative of the equation and you will get 750 -10Q.
IFT support team