Chapter 15 Monopoly

Chapter 15 Monopoly - Chapter 15 Monopoly Monopoly is a...

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Chapter 15 Monopoly Monopoly is a market structure in which one firm makes up the entire market How does a monopolist’s decision differ from collective decision of competing firms? o A monopolistic firm takes into account that its output decision can affect price: its marginal revenue IS NOT ITS PRICE Monopolist’s marginal revenue is always below its price When MR < MC, reducing output increases total profit; MC < MR, increase production because total profit will rise. IF MR = MC, monopolist is maximizing their profit Monopolistic will charge maximum price consumers are willing to pay for that quantity Patent is legal protection of a technical innovation that gives person holding it sole right to use that innovation –it gives the holder, the monopolistic, the ability to product that good Benefit lost to society from reducing output at MR = Demand to MR = MC is the area under the demand curve between those two outputs Triangular area created are the net cost to society from the existence of monopoly
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This note was uploaded on 02/23/2011 for the course ECON 2010 taught by Professor Moonjung during the Spring '09 term at UVA.

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Chapter 15 Monopoly - Chapter 15 Monopoly Monopoly is a...

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