21Lecture

21Lecture - LECTURE 21 Today is Thursday, November 4, 2010....

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LECTURE 21 Today is Thursday, November 4, 2010. On November 9, 2009, the price of gold closed at $1,100 per troy ounce for the first time in history. Today it passed $1,385 per troy ounce, again, for the first time in history. THE COSTS OF MONOPOLY As discussed in class, a competitive industry (and market) provides so many benefits to society, and a monopolistic industry (and market) imposes so many costs on society, that as long ago as 1890, the U.S. Congress passed into law the Sherman Antitrust Act . The Sherman Act essentially made acting like a monopolist, or trying to form a monopoly, illegal. We will have a lot more to discuss with respect to this, and other antitrust legislation, before the end of the semester. For now, using our gold mining industry example, let us define with more precision the particular differences in performance with respect to competition versus monopoly. Look at Figure 21-1. Figure 21-1 is basically identical to Figure 20-1 1 and Figure 20-5 2 . Assure yourself that the following propositions are true: Proposition 1: Line JK is the market demand curve in competition. The MC curve is the horizontal sum of all of the marginal cost curves of all the competitive firms supplying the market, and is the market supply curve. Equilibrium in the market is at the intersection of the market demand curve and the market supply curve at point E. In competition, the price of the product would be OD. In competition, the quantity of gold produced would be OF per week. The total revenue spent by consumers each week and received by the competitive firms is ODEF. The total benefit to the consumers is OJEF. The consumer surplus received by consumers is DJE.
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21Lecture - LECTURE 21 Today is Thursday, November 4, 2010....

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