Week 8 Monopoly - Monopoly (TF Chapter 10) 1 Todays agenda...

Info iconThis preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
Monopoly (TF Chapter 10) 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Today’s agenda What is a monopoly? How does a single-price monopoly determine price and output? Compare monopoly and perfect competition Price discriminating monopolies 2
Background image of page 2
What is a monopoly? A monopoly is an industry comprised of a single firm. No close substitute exists for the firm’s product Protected from competition by a barrier preventing the entry of new firms. It has market power – the ability to affect price 3
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Barriers to Entry Barriers to entry are legal or natural constraints that protect a firm from potential competitors. A barrier to entry is any cost that must be incurred by a new entrant that incumbents do not bear. 4
Background image of page 4
Barriers to Entry Legal Barriers to Entry In a legal monopoly competition and entry is restricted by the granting of: a public franchise government license patent, or copyright. Natural Barriers to Entry A firm may have sole ownership of resources required for production 5
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Natural Monopoly A natural monopoly results from a situation in which one firm can supply the entire market at a lower cost than two or more firms There must be high economies of scale 6
Background image of page 6
ATC Natural Monopoly D P Q 7
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Monopoly Price-Setting Strategies A single-price monopolist is a firm that must sell each unit of its output for the same price. Price discrimination is the practice of selling different units of a good or service for different prices. 8
Background image of page 8
Single-Price Monopoly The firm’s demand curve is the entire market demand curve. Marginal revenue is not the same as the market price. 9
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Monopolist’s revenue Total revenue: TR = P x Q Average revenue: AR =TR/Q = (P x Q )/Q= P Marginal revenue: MR= TR/ Q, or 10 MR dQ dTR =
Background image of page 10
Monopolist’s total, average and marginal revenue Quantity Price Total revenue Average revenue Marginal revenue Q P 0 $11 1 10 2 9 3 8 4 7 5 6 6 5 7 4 8 3 Slide: 11
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 12
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 39

Week 8 Monopoly - Monopoly (TF Chapter 10) 1 Todays agenda...

This preview shows document pages 1 - 12. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online