Unit 3: Are Businesses Efficient? Product Markets and Efficiency

Lesson 10b: Monopoly: Long Run Equilibrium:
Efficiency, Price Discrimination, and Regulation

Key Graphs

Monopoly: Long Run Equilibrium - M is the profit maximizing quantity (MR=MC); What We Get - Q is the allocatively efficient quantity (P=MC); What We Want - N is the productively efficient quantity (MC=ATC); producing at a minimum cost Regulated Natural Monopoly - Q3 is the profit maximizing quantity (MR=MC) if unregulated - Q2 is the allocatively efficient quantity (P=MC) - Q4 is the productively efficient quantity (MC=ATC) - Q1 is the "fair return" quantity if regulated Monopoly with Perfect Price Discrimination - M is the profit maximizing quantity (MR=MC) if no price discrimination; What We Get - Q is the profit maximizing quantity (D=MR=MC) if there is perfect price discrimination - Q is also the allocatively efficient quantity (P=MC); What We Want - N is the productively efficient quantity (MC=ATC); Producing at a Minimum Cost

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