L09 - ECO 100Y ECO 100Y Introduction to Economics Economics...

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ECO 100Y Introduction to Economics Lecture 9: Monopoly © Gustavo Indart Slide 1
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Characteristics of a Monopol Characteristics of a Monopoly ! There is only one supplier of a commodity ! The commodity has no close substitutes ! There is a barrier to the entry of new firms © Gustavo Indart Slide 2
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Barriers to Entr Barriers to Entry ! Barriers to entry are legal or natural impediments protecting a firm from competition from potential new protecting a firm from competition from potential new entrants ! Legal barrier to entry " Public franchise " Government licence " Patent ! Natural barriers to entry Natural barriers to entry " Unique source of supply of a raw material " Economies of scal © Gustavo Indart Slide 3 Economies of scale
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Single Single-Price Unregulated Price Unregulated Monopoly ! Most monopolies are regulated by government " We will examine the case of an unregulated monopoly " This will show why governments regulate monopolie monopolies ! We will begin with the analysis of a single-price " That is, a monopoly that charges the same price for each and every unit of its outpu © Gustavo Indart Slide 4 each and every unit of its output
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Short Short-Run Cost Schedule Run Cost Schedule $ MC AC AVC Q We will assume that the cost schedule of a monopolist is similar to that of a competitive firm that is mainly that the average total cost curve is Ushaped © Gustavo Indart Slide 5 competitive firm, that is, mainly that the is U-shaped .
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Demand Curve Facing a Monopolist P What distinguishes a monopoly firm fr m firm th t p r t nd r p rf t from a firm that operates under perfect competition is the firm’s demand curve.
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L09 - ECO 100Y ECO 100Y Introduction to Economics Economics...

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