Micro Foundations · intermediate
What moves on the Monopoly & Cost Curves diagram
Cost shocks pass through less than one-for-one under market powermarket powerThe ability to profitably hold price above marginal cost., the markup cushions the price.
Start at MR = MC.
Input prices rise. MC shifts up.
The monopolist cuts output and raises price, but by LESS than the cost increase: it absorbs part of the shock to protect volume.
Examiners ask this as: monopoly cost increase, mc up markup.
Other scenarios on Monopoly & Cost Curves