Chapter9part10 - AGEC 105 Chapter 9 Imperfect Competition...

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Chapter 9 Imperfect Competition Part 1 AGEC 105
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Quiz 4, Friday, October 29, Chapter 8 Exam 2, Wednesday, November 3, Chapters 6, 8 and 9 Review problems are posted on E-learning Review session on Tuesday, November 2, 7:30-9:30pm, Blocker 113 Announcement
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Imperfect Competition Monopoly Monopolistic Competition Oligopoly Government Intervention Topics
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4 What Is a Monopoly? A monopoly firm is the only seller of a good or service with no close substitutes Market in which the monopoly firm operates is called a monopoly market Existence of a monopoly means that something is causing other firms to stay out of the market Rather than enter and compete with firm already there What barrier prevents additional firms from entering the market? Several possible answers Economies of scale Network externalities Legal barriers
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5 Network Externalities All of this clearly applies to the market for computer operating systems When you buy a computer already loaded with Microsoft Windows, you benefit By having a large number of people with whom you can easily share documents Huge number of computers everywhere you can easily operate You gain access to many more software programs, like Microsoft Word, Excel, or Outlook, since many more programs are designed for Windows than for the few alternatives You can save time by just calling knowledgeable friends or coworkers Rather than attempting to contact technical support
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6 Legal Barriers Sometimes public interest is best served by having a single seller in a market Many monopolies arise because of legal barriers including Protection of intellectual property Government franchise
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7 Protection of Intellectual Property The words you are reading right now are an example of intellectual property, which includes literary, artistic and musical works, and scientific inventions In dealing with intellectual property government strikes a compromise Allows creators of intellectual property to enjoy a monopoly and earn economic profit, but only for a limited period of time Once time is up, other sellers are allowed to enter the market, and it is hoped that competition among them will bring down prices Most important kinds of legal protection for intellectual property are Patents Temporary grant of monopoly rights over a new product or scientific discovery Copyrights
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