Monopoly

Monopoly - one firm 8 Unregulated natural monopoly Monopoly...

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Principles of Microeconomics Shomu Banerjee Emory University Fall 2011 9. Monopoly
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Uniform-price monopoly A1• There are a large number of consumers A2• There is a single seller A3• The monopolist charges the same price from all customers A4• There are barriers to entry
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Monopolist’s marginal revenue Price Quantity 0 10 10 TR MR P Q 9 8 7 6 5 4 3 2 1 MR Demand
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Monopolist’s output and price Price Quantity 0 10 10 9 8 7 6 5 4 3 2 1 MR MC 4 Demand
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Monopolist’s profit Price Quantity 0 10 10 Demand 9 8 7 6 5 4 3 2 1 MR MC 4 AC
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Monopoly deadweight loss Price Quantity 0 10 10 9 8 7 6 5 4 3 2 1 MC Demand MR Q ^ Q*
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Natural monopoly Economies of scale: Decreasing AC Quantity 0 10 10 9 8 7 6 5 4 3 2 1 4 AC Price Two firms versus
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Unformatted text preview: one firm 8 Unregulated natural monopoly Monopoly produces where MR = MC Monopoly makes supernormal profit Large deadweight loss Quantity 10 10 9 8 7 6 5 4 3 2 1 4 Demand MR Price MC AC Q ^ U Regulated natural monopoly Monopoly produces where P = MC Deadweight loss = 0 Lump sum subsidy needed to earn normal profit Quantity 10 10 9 8 7 6 5 4 3 2 1 4 Demand Price MC AC MC pricing Q ^ U Regulated natural monopoly Quantity 10 10 9 8 7 6 5 4 3 2 1 4 Demand Price MC AC Q ^ AC pricing U...
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Monopoly - one firm 8 Unregulated natural monopoly Monopoly...

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