Chapter 8 Monopoly - Chapter 8 Monopoly -Pure monopoly- a...

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Chapter 8 Monopoly - Pure monopoly - a market that has only one seller: a single firm. -Cartels-groups of producers that set prices and outputs in concert. -There are two main issues to address in analyzing monopoly: (1) Must understand monopoly behavior- how a profit-maximizing monopolist determines price and output (2) One must appreciate tat a precondition for monopoly is the presence of barriers to entry. -Barriers to entry- factors that prevent other firms from entering the market and competing on an equal footing with monopolists -As a profit-maximizer, the monopolist should set its output such that the marginal revenue equals the marginal cost of production -pure monopoly enables the firm to earn excess profit, but the actual size of this product depends on a comparison of demand and cost -Barrier - any factor that blocks or impedes entry of new firms in a particular market -Barriers to competition- factors that, while not precluding rivals from the market, insulate a given firm from direct competition Source of entry barriers include: -Economics of scale, capital requirements, pure quality and cost advantages, product differentiation, control or resource, Patents, copyrights, and other legal barriers, strategic
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Chapter 8 Monopoly - Chapter 8 Monopoly -Pure monopoly- a...

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