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Chapter 1
Slide 31
Monopoly
The Multiplant Firm For many firms, production takes place in two or more different plants whose operating cost can differ.
Chapter 1
Slide 44
Monopoly Power
Lerner’s Index of Monopoly Power
L = (P - MC)/P The larger the value of L (between 0 and 1) the greater the monopoly power.
Chapter 1
Slide 32
Monopoly
The Multiplant Firm Choosing total output and the output for each plant: The marginal cost in each plant should be equal. The marginal cost should equal the marginal revenue for each plant.
The Demand for Toothbrushes
$/Q
2.00
At a market price of $1.50, elasticity of
demand is -1.5.
$/Q
2.00
1.50
1.00
10,000
20,000