4.1 — Modeling Firms With Market Power — Class Content

Meeting Dates

Section 1: Wednesday, November 16, 2022

Section 2: Thursday, November 17, 2022


Today we begin our look at “imperfect competition,” where firms have market power, meaning they can charge \(p>MC\) and search for the profit-maximizing quantity and price. Today is merely about how do change the model to understand how a firm with market power behaves. To assist us, we begin with an extreme case of a single seller, i.e. a monopoly. For now we only assume that there is a single firm, and see how it behaves differently than if it were in a competitive market. Next class we will begin to explore what could cause a market to have only a single seller, and what are some of the social consequences of market power.


  • Ch. 9-2-9.5 in Goolsbee, Levitt, and Syverson, 2019


Today we will be working on practice problems. Answers will be posted later on that page.


See the online appendix for today’s content:


Below, you can find the slides in two formats. Clicking the image will bring you to the html version of the slides in a new tab. The lower button will allow you to download a PDF version of the slides.


You can type h to see a special list of viewing options, and type o for an outline view of all the slides.

I suggest printing the slides beforehand and using them to take additional notes in class (not everything is in the slides)!


Download as PDF