Having seen examples of bte lets do a simple eco 100

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: arket that they respond with the only competitive strategy they know: violence. Legalizing drugs and regulating sales will eliminate drug dealers (in a good way) and boost tax revenues. Having seen examples of BTE, let’s do a simple ECO 100 model to see how BTE results in higher than competitive prices. Before BTE we had: $ A COMPETITIVE FIRM $ MARKET Now suppose a firm manages to erect BTE and becomes a “monopolist” so that its demand curve coincides with the market demand curve. The following graph shows the monopolist’s price and output – notice that the only way is if which entails erecting BTE to stop buyers from purchasing from other firms: 4 ECO 204 Chapter 16: Analysis of Firms with Market Power (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. MONOPOLY $ MARKET $ Monopoly supply point Profits BTE Here’s another example of “monopoly pricing” achieved by erecting BTE. In the US and Canada, real e...
View Full Document

This document was uploaded on 01/19/2014.

Ask a homework question - tutors are online