AP Microeconomics Unit 4: Monopolies & Monopolistic Competition Graphs, + Oligopoly Game Theory Matrix

1. MC = MR
2. Find quantity producing (Qm)
3. Find price according to demand curve (Pm)
4. Find costs according to where Qm intersects with AC curve (AC)
- Total costs: Qm * AC
- Total revenue: Qm * Pm
5. Profit = TR - TC

1. Socially Optimal Price
- P = MC (allocative efficiency)
2. Fair-Return Price (Break-Even)
- P = ATC (normal profit)

ATC is tangent to D
(as always, MC intersects at minimum ATC)

- If there is economic profit, it is change in demand NOT supply
- New firms will enter the market, and demand will decrease for the individual firm (not a supply increase)
- This shifts the D left, putting it back at equilibrium (normal profit)

- Firms leave the market, increasing demand

Firm has excess capacity: gap between minimum ATC output and profit maximizing output

Dominant strategy is the best move to make regardless of what your opponent does
Nash Equilibrium is the outcome that will occur when both firms make decisions simultaneously and have all the information

undefined

undefined