Lecture9_

Lecture9_ - Monopoly and Other Forms of Imperfect...

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Monopoly and Other Forms of Imperfect Competition LECTURE
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Slide 2 Perfect Competition The perfectly competitive firm has no influence over the market price. It can sell as many units as it wishes at that price. Typically, a “perfectly” competitive industry is one that consists of a large number of sellers, each of which produces a standardized product.
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Slide 3 Imperfect Competition Monopoly = "single seller" Oligopoly = "few sellers" Monopolistic competition : Many sellers, each with a differentiated product
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Slide 4 Different Forms of Imperfect Competition Pure Monopoly The only supplier of a unique product with no close substitutes. Barriers to entry into the market prevent competition. As the sole producer of a good, a monopolist is in a unique position : the monopolist is the market and completely controls the amount of output offered to sale.
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Slide 5 Example : In Hong Kong, the supply of electric power is monopolized by two vertically integrated (and not interconnected) companies: Hong Kong Electric supplies Hong Kong Island. China Light and Power (CLP) has monopoly over electricity in Kowloon and the NT. Monopoly
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Slide 6 Monopolistic Competition (closest to perfect competition) A large number of firms that produce slightly differentiated products that are reasonably close substitutes for one another. Long-run adjustment to zero economic profits. Importance of differentiation. Different Forms of Imperfect Competition
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Slide 7 Examples : Local gasoline retailing Convenience stores Monopolistic Competition
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Slide 8 Oligopoly Industry structure in which a small number of large firms produce goods/services that are either close or perfect substitutes. Cost advantages from large size may prevent the long-run adjustment to zero economic profit. Undifferentiated and differentiated products. Different Forms of Imperfect Competition
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Slide 9 Example : The market for mobile phone service in HK. Oligopoly
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Slide 10 Four Types of Market Structure
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Slide 11 Market Power Market power Market power is a firm’s ability to raise the price of a good without losing all its sales. Market power is the basis for monopolistic control of a market.
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Slide 12 The firm controls the only source of the factors required to produce a good. Example : Perrier’s mineral spring Five Sources of Market Power 1. Exclusive control over inputs
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Slide 13 Protection offered to inventors (or authors - publishers). A patent provides monopoly power to an inventor for a certain period of time. Example : prescription drugs Five Sources of Market Power 2. Patents and Copyrights
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Slide 14 The government offers the opportunity to engage in a particular kind of activity to one or a few firms. Examples
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Lecture9_ - Monopoly and Other Forms of Imperfect...

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