10.26.10 Econ

10.26.10 Econ - though we’re all using macbooks right now(apple’s operating system Price maker(monopoly = this firm has a price policy It’s

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10/26/10 Econ Notes Monopoly (Market Failure ) Monopoly = a soul seller in a market. The only seller in a market. However, it leaves unanswered of what is a market What’s in the market? There’s some gap in the chain of substitutes in what’s in the market, and what’s outside A firm that controls the sales is the monopoly We’ll talk about this firm as matters of degree - to some extent it is a monopoly, but since there are always more substitutes than there are less, the monopoly loses some of its power. - Produce a product to which new entry is difficult. The biggest monopoly case in America is U.S. vs. Microsoft However, Microsoft claims that they had to compete against linux, apple, etc. But government said the relavent market is just operating system on intel compatible microprocessors. Microsoft had 90% of that market, which was close to 100%, event
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Unformatted text preview: though we’re all using macbooks right now (apple’s operating system). Price maker (monopoly) = this firm has a price policy. It’s searching around for where to set the price to maximize the firm. The firm should price along the demand curve of consumers. Marginal revenue is extra revenue for one more extra unit of output. Marginal revenue is difference of TR2- TR1 Marginal Revenue could be negative MC = MR is the profit maximizing rate of output. Highest price you can get for rate of output Q* is P* Shaded area is economic profit the firm receives. Profit = (P*-AC*) x Q* Demand can shift to the left, so it now has a new marginal revenue. If there are new firms of entry, the firms already in the market will cut their price and output and lose some revenue....
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This note was uploaded on 02/24/2011 for the course ECON ECON 201 taught by Professor Elzinga during the Spring '09 term at UVA.

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10.26.10 Econ - though we’re all using macbooks right now(apple’s operating system Price maker(monopoly = this firm has a price policy It’s

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