Chapter 10 outline

Chapter 10 outline - Chapter 10: Monopoly Objective:...

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Chapter 10: Monopoly 1. What is a Monopoly? -Monopoly: a market with just one seller -We usually define a market to include all close substitutes for a product -Monopoly: there exist substitutes but not very close substitutes -Pure monopoly: one seller of a good where few buyers can find a substitute 2. How Monopolies Arise? -Monopolies arise from economies of scale (long run ATC slope down) -Natural monopoly: A monopoly that arises when, due to economies of scale, a single firm can produce for the entire market at lower cost per unit than could two or more firms -Many monopolies arise because of legal barriers. Two important ones: 1) Protection of intellectual property (copyrights, patents, musical work…) ~government compromises: it allows the creator of intellectual property to enjoy a monopoly and earn profit –BUT only for a limited time ~ex. Patents = 20 years. After, fair play ~ex. Copyrights = 70+ years 2) Government franchise(US Postal Service)
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This note was uploaded on 03/11/2011 for the course ECN 1A taught by Professor Hoynes during the Fall '10 term at UC Davis.

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Chapter 10 outline - Chapter 10: Monopoly Objective:...

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