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Oct1st - Recall that real transport costs were reduced =...

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18:32 Overall effect of merger era on competition Econ theory predicts monopoly will increase P and reduce Q Creates deadweight loss Check Graph Loss: Measurement of the loss to society that results from monopoly  control of the market (Lost consumer surplus + lost producer surplus) However, 1865-1914: Real prices falling and output increasing in  o Manufactured goods o Transportation o Financial services Why, given all the merger activity, were P and Q not generally following  monopoly trends? o Firms Grew, but so did markets Monopoly power depends on the size of the firm relative to its market Relates to point below: Mail order companies competing w/ local firms o In some local markets, competition actually increased
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Unformatted text preview: Recall that real transport costs were reduced = allowed firms to participate in national markets o Few firms managed to maintain monopoly power The SR monopoly power of firms has typically eroded in the LR due to entry b/c profits create an incentive for entry. o Most markets were closer to oligopolies A few firms producing a good that is similar o Diversification meant availability of substitutes More diversification > more price elastic demand Thus, increase number of substitutes limits the market power of “monopoly” firm o Technological change meant opening of barriers to entry 18:32 18:32...
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