7 - firm, expensive to put up new ones for new firm) 2....

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Monopolies- closed seller that has no close substitutes *look up how gov controls monopolies 1. How do we have monopolies? a. Gov franchise (Gives some business exclusive rights to deal in that mkt) i. was the sole phone network for a while. b. i. Pharmaceuticals – exact chemical compound ii. Monopoly the game they have a monopoly on the board game c. Sole ownership of resource i. Baseball mud d. Natural monopoly i. Firms that are already established, and costs for new products are low, compared to the costs for new products of new firms, which are very high, wasted competition ii. YKK zipper iii. Large initial fixed cost, low variable cost iv. Putting up phone lines (cheap to put up new ones for established
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Unformatted text preview: firm, expensive to put up new ones for new firm) 2. Description a. Monopolies are price makers, competitive firms (atomistic) are price takers. b. MR = MC, where cost is roughly same as competitive firm i. Demand = Price = AR = MR in competitive firms 1. Demand curve is flat c. Monopolies must drop price to increase demand i. MR < Price ii. Profit is maximized when MR = MC 1. Go up to demand curve to find the price 2. Go up to ATC to find cost 3. Area btwn the two is profit 4. Monopoly price is on the demand curve above where MR=MC 5. Competitive firm price is on demand curve where MC =Demand d. Welfare: i. CS decreases, PS increases...
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This note was uploaded on 04/07/2008 for the course EC 10 taught by Professor Mankiw during the Spring '08 term at Harvard.

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