Econ203FinalStudyGuide

Econ203FinalStudyGuide - ECON-203 Microeconomics Final...

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Chapter 10-Pure Monopoly o Major characteristics (pg. 190) Single seller No close substitutes Price maker Blocked entry Nonprice competition o Downward sloping demand curve (pg. 192) Purely competitive seller faces perfectly elastic demand at price determined by market supply/demand. It's a price taker that sells as much or as little as it wants to market price with constant marginal revenue = price A pure monopolist's demand curve is the market demand curve. Since market demand isn't perfectly elastic, the demand curve is downsloping Marginal revenue curve below demand curve(MR<P) Downward sloping demand means monopolist is a price maker Operates in the elastic region of demand (MR>0, TR increasing) since in inelastic region (MR<0, TR declining), total revenue is increased by reducing total costs by reducing output and moving back to inelastic region o MR=MC creates profit maximization, o No monopoly supply curve o Barriers to entry (pg. 191) Economies of scale Patents and licenses Ownership or control of essential resources Monopoly pricing/advertising/other strategic actions Research and technological (driven by potential competition) o Price discrimination Selling a specific product at more than one price when the price differences are not justified by cost differences Depends on elasticity of demand (pg. 204, fig 10.8) o Monopoly price (MR=MC) Fair-return price (P=ATC) Socially optimal price (P=MC) – allocative efficiency o Consumer surplus (+ producer surplus = deadweight loss) P>MC, P>min ATC, efficiency loss Chapter 11-Monopolistic Competition and Oligopoly Monopolistic Competition o Major Characteristics of Monopolistic Competition (pg. 211) Relatively large number of sellers
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This note was uploaded on 05/12/2008 for the course ECON 203 taught by Professor Al-sabea during the Spring '05 term at USC.

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Econ203FinalStudyGuide - ECON-203 Microeconomics Final...

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