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Unformatted text preview: Chapter 9 18/10/2010 17:06:00 Perfectly competitive recap See graphs 9.1 Market: o economically efficient o TS= CS + PS, S max o MB = MC on last unit produced Firm: o Price takers o Produce where MB= MC o P= MR (as price taker) o Pi = 0 in LR Monopoly: Market = firm Not economically efficient, there is DWL CS will decrease (some to producers, some to DWL) PS will increase (get some from consumers, more than loose to DWL) MB > MC on last unit produced Price makers o Produce where MR= MC and price off demand curve o P> MR as P maker o Pi > 0 in Long Run Monopoly: A firm that is the only seller of a g/s with no close substitutes available o Barriers to entry Sources of barriers to entry: Government created Ownership of a key resource Network externalities Large economies of scale Government created Patents Copy rights Government granted public franchise o Creating an exclusive legal provider of a g/s (e.g. utilities- water/electric) Key resource owned by a single firm...
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