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
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
supply point Profits BTE Here’s another example of “monopoly pricing” achieved by erecting BTE. In the US and Canada, real e...
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This document was uploaded on 01/19/2014.
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