2023Ch10SumMcBr - Monopoly Chapter 10 Outline...

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Monopoly Chapter 10
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Outline Characteristics of monopoly Demand and marginal revenue Total revenue - total cost method Marginal revenue - marginal cost method Application problem Price discrimination Monopoly compared to perfect competition Monopoly and government regulation
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Characteristics of monopoly Under monopoly, there is virtually no competition at all . The characteristics are: single producer of a product (pure monopoly) product with no close substitutes considerable power to affect the market some advertising entry is blocked Since the monopoly is the market, what happens in a monopoly affects the market and the price of the product. For this reason, the firm is considered a price maker. Utilities, such as with electricity and local telephone service, are examples. Some firms are near monopolies and may fall under the monopoly model, such as with Microsoft controlling 85% of the PC operating systems market and Intel providing 80% of PC central microprocessors.
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Demand and marginal revenue Since a monopoly has considerable power in the market, and its actions can affect the price of the product it sells, a price (P) schedule for this firm would be downward sloping. This price schedule is also an average revenue curve as well as a demand curve. Marginal revenue in this model, however, will not be the same value as price and demand. In fact, marginal revenue is less than price. Graphically, MR lies below the demand curve (AR and price curve) for a monopoly. Since a monopoly produces a product with no close
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This note was uploaded on 02/22/2011 for the course ECON 2023 taught by Professor Meier during the Spring '11 term at St. Petersburg College.

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2023Ch10SumMcBr - Monopoly Chapter 10 Outline...

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