ECO FINAL REVIEW

ECO FINAL REVIEW - Monopolies CHARACTERISTICS Only 1 firm...

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Monopolies : CHARACTERISTICS: Only 1 firm Undifferentiated product Has all information on market conditions Barriers to entry IMPLICATIONS: Price maker – choose a price within same range Profits greater than zero are possible in the long run BARRIERS TO ENTRY: Legal – patents, copyrights, trademarks, etc. Sole provider of a key input. (ex. Input = diamonds, provider = mines) Economies of sale o Increase size of firm ; Increase quantity Decrease the cost Supply the entire market o Increase price; lose  some  customers IN THE LONG RUN: Graph is same as in SR – until the barriers go away Barriers prevent entry o No entry
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Demand stays put EX. – CASE OF THE NATURAL MONOPOLY: No barriers to entry Occurs when demand for a good is lower than the minimum (LR-ATC) o Min. LR-ATC extends beyond the range of demand.
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