4-17-09 - Microeconomics Class Notes 4/17/09 Monopolies...

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Microeconomics – Class Notes – 4/17/09 Monopolies always set MR = MC Monopolies naturally restrict the output and raise the price of a good or source
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Monopolies never produce on the inelastic portion of the demand curve Monopolies always produce on the elastic portion of the demand curve
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Measures of Market Power Lerner Index – we have to estimate the marginal cost of a firm in order to calculate this. Takes on a value between 0 and 1 o Both 0 and 1 are extreme cases o 0 perfect competition o 1 Monopoly Lerner index 1 / elasticity of demand
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Monopoly always operates on the elastic portion of the demand curve, so the maximum elasticity on the demand curve at which the monopoly firm will operate at is 1.
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C4 concentration ratio = percentage of sales of the top 4 firms in the industry C8 concentration ratio = Percentage sales of top 8 firms in the industry Herfindahl Index – Sum of squared market shares of all firms in the industry. 30, 30, 20, 20 %
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This note was uploaded on 06/03/2009 for the course ECON 200 taught by Professor Nonnenmacher during the Spring '09 term at Allegheny.

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4-17-09 - Microeconomics Class Notes 4/17/09 Monopolies...

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