ECO2201_Slides_7.1&7.2_Monopoly_part1.pdf

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Sorakom (Baltic) Ngamdecho Department of Business Economics ECO 2201 Microeconomics Lesson 7.1&7.2 Monopoly 1 Sorakom (Baltic) Ngamdecho Department of Business Economics Monopoly ECO 2201 Lesson 7.1&7.2 1. Introduction ì What is Monopoly? ì Monopoly Characteristics 2. Barriers to Entry ì Economies of scale ì Patents and licenses ì Ownership of essential resources ì Pricing and other strategic behaviors 3. Demand and Marginal Revenue Road Map 1
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Sorakom (Baltic) Ngamdecho Department of Business Economics ECO 2201 Microeconomics Lesson 7.1&7.2 Monopoly 2 4. Monopolist’s Profit Maximization ì Total Approach ì Marginal Approach 5. Observations (and Misconceptions) 6. Economic Effect of Monopoly ì Price, Output and Efficiency ì Income Transfer ì Cost Complications 7. Assessment and Policy Options 8. Regulated Monopoly Review & Exercises Road Map 2 ì Four Market Models 1. Pure (or perfect) competition 2. Pure monopoly 3. Monopolistic competition 4. Oligopoly Market Structure (Revisited) 3 Pure Competition Monopolistic Competition Oligopoly Pure Monopoly Market Structure Continuum Ch. 10-11 (lesson 6.1-6.3) Ch. 13 (lesson 8.1) Ch. 13 (lesson 8.2) Ch. 12 (lesson 7.1-7.3)
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Sorakom (Baltic) Ngamdecho Department of Business Economics ECO 2201 Microeconomics Lesson 7.1&7.2 Monopoly 3 ì Four Market Models Market Structure (Revisited) 4 Characteristic Pure/Perfect Competition Monopolistic Competition Oligopoly Monopoly Number of firms A very large number Many Few One Type of product Standardized Differentiated Standardized/ differentiated Unique; no close subs. Control over price None Some, but within rather narrow limits Limited by mutual inter-dependence; considerable with collusion Considerable Conditions of entry Very easy, no obstacles Relatively easy Significant obstacles Blocked Nonprice Competition None Considerable emphasis on advertising, brand names, trademarks Typically a great deal, particularly with product differentiation Mostly public relation advertising 1. Introduction ì What Is Monopoly? ì Monopoly is a market structure in which one firm makes up the entire market. ì There are barriers to entry into the market prevent competition, and there are no close substitutes for the monopolist’s product. ì Some terminology ì Monopolistic firm = monopolist ì Monopolistic market = monopoly 5
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Sorakom (Baltic) Ngamdecho Department of Business Economics ECO 2201 Microeconomics Lesson 7.1&7.2 Monopoly 4 ì Terminology 1. Introduction 6 Market Structure Firms Pure Competition/ Perfect Competition/ Perfectly Competitive Market Purely Competitive Firms/ Perfectly Competitive Firms Monopolistic Competition/ Monopolistically Competitive Market Monopolistically Competitive Firms Oligopoly/ Oligopolistic Market Oligopolists/Oligopolies/ Oligopolistic Firms Monopoly/ Monopolistic Market Monopolist/ Monopolistic Firm ì Monopoly Characteristics 1.
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