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Chapter 9 - Chapter 9 17:06:00 ← Perfectly competitive...

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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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Chapter 9 - Chapter 9 17:06:00 ← Perfectly competitive...

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