BECN CH 10 - BECN 150 CH 10 Monopoly Monopoly an industry...

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BECN 150- CH 10 Monopoly Monopoly- an industry in which one firm is the sole producer or seller of a product or service for which no close substitutes exist o They are price make o Blocked entry- economic, technological, legal or some other type of barrier which is blocked in monopoly Barriers to entry- anything that artificially prevents the entry of firms into an industry o Patents- exclusive right of an inventor to use, or to allow another to use their invention; length of a patent is 20 years o Licences- limit the number of competitor’s in an industry Monopoly Demand 1. Economies of scale, patents, or resource ownership secure the monopolist’s status 2. Government does not regulate the firm 3. The firm is a single price monopolist; it charges the same price for all units of output Demand curve is the market demand curve, which is down sloping Price and Marginal Revenue in Monopoly 1. Marginal revenue is less than price o Marginal revenue is less than price (average revenue) for every level of output except the first o If the monopolist can sell 3 units at $142 or 4 units at $132. If they choose to sell the extra unit for $132, they have to charge $132 for the first three units.
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