Chapter 9--Monopoly

Chapter 9--Monopoly - charges the highest price per unit at...

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Chapter 9—Monopoly I. The Theory of Monopoly A. The theory of monopoly is built on three assumptions: 1. There is one seller. 2. The single seller sells a product for which where are no close substitutes. 3. There are extremely high barriers to entry into the industry. B. High barriers to entry may take the form of legal barriers (public, franchise, patent, government license), economies of scale, or exclusive ownership of a scarce resource. II. Monopoly Pricing and Output A. The profit-maximizing monopolist produces the quantity of output at which MR = MC and
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Unformatted text preview: charges the highest price per unit at which this quantity of output can be sold. B. For the single-price monopolist, P > MR; therefore, its demand curve lies above its marginal revenue curve. C. The single-prices monopolist sells its output at a price higher than its marginal cost, P > MC, and therefore is not resource allocative. D. Consider a perfectly competitive market and a monopoly market, each with the same demand and marginal cost curves. Consumers surplus is greater in the perfectly competitive market. 7 November 2007 1...
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This note was uploaded on 04/16/2008 for the course ECO 1311 taught by Professor Wheaton during the Fall '07 term at SMU.

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