Monopoly - MONOPOLY MONOPOLY Topic8 Chapter 15...

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  MONOPOLY Topic 8 MONOPOLY Chapter 15
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Characteristics of a pure  monopoly Single seller High barriers to entry Unique Product
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Barriers to Entry High barriers to entry explain the existence  of monopolies Block all potential competitors
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Why Monopolies Arise Economies of scale In some industries, efficient, low-cost production can  only be achieved if producers are large – Natural  monopoly Legal Barriers  Regulations, Patents and Licences Control of the supply of raw materials
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Monopoly Demand curve Monopolist’s demand curve is the  industry demand curve   and therefore is  down-sloping Monopolist is a  ‘price maker’  since it  can influence total supply
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Demand curves Price Because competitive firms are price takers, they in effect face horizontal demand curves, as in panel (a). Because a monopoly firm is the sole producer in its market, it faces the downward- sloping market demand curve, as in panel (b). As a result, the monopoly has to accept a lower price if it wants to sell more output. Quantity of output 0 Competitive Firm Price Quantity of output 0 Monopoly Demand Demand
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Demand and MR Demand curve:      P= a - bQ MR= a – 2bQ the same point MR < Price
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This note was uploaded on 02/08/2012 for the course TFTGFT 012 taught by Professor Hfyfgy during the Winter '11 term at Alaska Bible.

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Monopoly - MONOPOLY MONOPOLY Topic8 Chapter 15...

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