Chapter 12 - Monopoly

Chapter 12 - Monopoly - M ONOPOLY 12 CHAPTER Monopoly E.g.,...

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12 CHAPTER MONOPOLY
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Monopoly E.g., About 90% of PC’s use Microsoft Windows. Microsoft isn’t a price taker like the firms in perfect competition. How does Microsoft decide the price and quantity? E.g., Airline pricing. Different types of consumers often pay different prices. Why?
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Market Power How Monopoly Arises? Typically, a monopoly has two key features: No close substitutes Barriers to entry. (E.g., patents, or legal.) Monopolies can be local, regional, national or global.
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Monopoly Price-Setting Strategies Single-price monopoly: sells each unit of Q for the same P to all customers. Price discrimination: firm sells same product or service for different prices. Many firms price discriminate, but NOT all of them are monopoly firms.
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Price and Marginal Revenue A monopoly is a price setter. Reason? Monopolist faces the market demand curve. To sell larger Q, a monopoly must lower lower P.
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Chapter 12 - Monopoly - M ONOPOLY 12 CHAPTER Monopoly E.g.,...

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