ajaz_eco_204_2012_2013_chapter_16_Market_Power

Having seen examples of bte lets do a simple eco 100

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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...
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