Ag Econ Chapter 11

Ag Econ Chapter 11 - accumulation of wealth – isn’t...

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Ag Econ Chapter # 11 side note – watch Home of the Brave. Monopoly supply one seller and that seller controls market price (Price maker) unique product high entry and exit possibly imperfect information among buyers and sellers Opposite of perfect competition Barriers to entry patents – 17 years, it is to recoup losses in creation legal restrictions control of a scarce resource technical superiority in production economies of scale production deliberate entry barriers such as lawsuits or large advertising campaigns natural monopoly only monopolies that can operate within the economy long run average total cost curve negative slope in this the more you produce, the lower the average cost will be clearly larger firms can drive out the small guys monopolies can choose level of production or a price to charge, but can’t choose both see the notes on page 135 (D) decision point is the point where MR = MC from AC to Demand is the Profit/loss MR curve will always lie below the demand curve (see Pg 138) inefficient Monopolies
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Unformatted text preview: accumulation of wealth – isn’t good to wealth there are restricted outputs and higher prices PAY ATTENTION TO THE INEFFICIENT RESOURCE ALLOCATION AND MARGINAL ANALYSIS!! Marginal Utility is greater than Marginal cost we under produce, the exception is natural monopolies price is less than marginal cost, so that we have to raise production KNOW THE GRAPH ON PAGE 140! IT WILL BE ON A TEST! not many good things about a monopoly. there are a few things that could be good… may shift demand to right through advertising efforts and thus expand output or production. may shift cost curves downward due to economies of scale. since a natural monopoly may have lower costs that an industry composted of many smaller firms, prices may be competitive may aid innovation by investing in Research and development monopoly is a price maker as compared to Perfect competition’s price taker inefficient resource allocation too little output and too high of price...
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Ag Econ Chapter 11 - accumulation of wealth – isn’t...

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