chapter 10 - Chapter 10 Monopoly- when theres only one...

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Chapter 10 Monopoly - when there’s only one seller in the market The industry must have only 1 firm The firm must have barriers to entry, so potential competitors are unable to enter the industry There must be no close substitutes Monopolists are price makers because there is only one firm in the industry; the monopolist may be able to increase its profits by raising prices. It has market power . Patent - gives an inventor a monopoly on his invention Exclusive franchise - a business arrangement under which only one firm is allowed to produce in a particular territory. Example: professional sports. Natural monopoly - if a single firm can produce at a lower average total cost than any combination of two or three or more firms Single-price monopoly - the firm sells all of its hot dogs (items) at the same price Entire market demand - the demand curve for the firms output is the same as the market demand curve If a single-price monopolist wants to sell more output, it has to decrease the price on all units that it sells. For monopolists, marginal revenue will decrease as quantity increases. When the demand curve is a straight line, the marginal revenue curve is also a straight line and the marginal revenue curve is exactly twice as steep. Since marginal revenue is the change in total revenue when one additional unit is sold, the marginal revenue curve is the slope of the total revenue curve. Average revenue
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This note was uploaded on 12/04/2011 for the course EC 201 taught by Professor Haider during the Fall '10 term at Michigan State University.

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chapter 10 - Chapter 10 Monopoly- when theres only one...

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