Chapter 15 Monopoly (1)

Chapter 15 Monopoly (1) - 9 B. The Monoplolist...

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Chapter 15: Monopoly Page 1 of 9 I. The Meaning of Monopoly Monopoly : A firm that is the sole seller of a product w/out close substitutes. A. What Monopolies Do 1. g 2. ff 3. f
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Page 2 of 9 B. Why Do Monopolies Exist? 3 fundamental Barriers to Entry 1. Monopoly Resources: The monopoly has control of a key resource 2. Government – created Barrier or regulation: The Gov’t gives a single firm exclusive right to produce some good 3. Natural Monopolies: A single firm can supply the good to the entire market at a lower cost than if there were two or more firms.
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Page 3 of 9 II. How a Monopoly Maximizes Profit A. How much to produce MR = _____ A quantity effect (output effect) . One more unit is sold, increasing total revenue by the price at which the unit is sold. A price effect . In order to sell the last unit, the monopolist must cut the market price on all units sold. This decreases total revenue.
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Unformatted text preview: 9 B. The Monoplolist Profit-Maximizing Output and Price C. Compared to Perfect Competition Price Consumer Surplus Quantity Producer Surplus (Economic Profit) Page 6 of 9 C. Welfare Costs of Monopolies 1. R 2. d 3. T Page 7 of 9 D. Public Policy Towards Monopolies 1. Make the industry more competitive: The Gov’t breaks up the monopoly 2. Regulation (Natural Monopoly) Page 8 of 9 3. Public Ownership 4. Doing Nothing III. Price Discrimination Price Discrimination : the business practice of selling the same good at different prices to different customers. Eagle Airlines the only airline that services Oxford – Mexico City MC = $125 Business Travelers 2,000 $550 Students 2,000 $150 A. Only one Price Business T Students Page 9 of 9 A. Multiple Pricing Business T Students B. Examples of Price Discrimination 1. Segmenting the market by group 2. Volume Discounts...
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This note was uploaded on 12/05/2011 for the course ECON 101 taught by Professor Dezhbakhsh during the Fall '07 term at Emory.

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Chapter 15 Monopoly (1) - 9 B. The Monoplolist...

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