rohlf_lecture9 - 8 EXHIBIT 7.3 Determining the...

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Chapter 7 Price Searching: The Firm with Market Power
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2 Monopolies Monopolies are illegal in the US, which we will discuss later How do you get a monopoly? Control of an input (e.g. Alcoa and bauxite) Government action (utility company) Patents, temporarily (to encourage innovation) Natural monopoly – falling AC throughout relevant range (because of high fixed costs)
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3 EXHIBIT 7.6 Economies of Scale
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4 EXHIBIT 7.7 Economies of Scale
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5 Monopolies By definition, monopolies are the only producer of a product They therefore have substantial power in price- setting They are not constrained by competition – fear of consumers buying from others But consumers may not buy at all at high prices Thus, monopolies are constrained by market demand for the product
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6 EXHIBIT 7.1 The Price Searcher’s Demand Curve
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7 EXHIBIT 7.2 Marginal Revenue for a Price Searcher
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Unformatted text preview: 8 EXHIBIT 7.3 Determining the Profit-Maximizing Price 9 Monopoly: Profit-maximizing price and quantity 10 Monopoly: Profit-maximizing profits 11 Monopoly in the long-run Can a monopoly sustain above normal profits (economic profits) in the long-run? Yes! Different from perfect competition 12 EXHIBIT 7.5 Price Searchers and Resource Misallocation 13 Anti-trust laws Monopolies and anti-competitive behavior is illegal in US through 3 laws: Sherman Anti-trust Act 1890 Outlawed price-fixing, monopolies Clayton Anti-trust Act 1914 Outlawed certain mergers and tying contracts Federal Trade Commission Act 1914 Created FTC and outlawed unfair competition 14 EXHIBIT 8.6 The Antitrust Laws and What They Do 15 EXHIBIT 7.4 Calculating the Short-Run Profit or Loss...
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rohlf_lecture9 - 8 EXHIBIT 7.3 Determining the...

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