Principles of Economics- Mankiw (5th) 334

Principles of - 344 PA R T F I V E F I R M B E H AV I O R A N D T H E O R G A N I Z AT I O N O F I N D U S T R Y consumers who otherwise would not

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344 PART FIVE FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY consumers who otherwise would not buy it. In the extreme case of perfect price discrimination, the deadweight losses of monopoly are completely eliminated. More generally, when price discrimination is imperfect, it can either raise or lower welfare compared to the outcome with a single monopoly price. monopoly, p. 316 natural monopoly, p. 318 price discrimination, p. 336 Key Concepts 1. Give an example of a government-created monopoly. Is creating this monopoly necessarily bad public policy? Explain. 2. Define natural monopoly. What does the size of a market have to do with whether an industry is a natural monopoly? 3. Why is a monopolist’s marginal revenue less than the price of its good? Can marginal revenue ever be negative? Explain. 4. Draw the demand, marginal-revenue, and marginal-cost curves for a monopolist. Show the profit-maximizing level of output. Show the profit-maximizing price. 5.
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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