Monopoly <br />(Chapter 15)<br />Presentation by<br />Ismail Ali and<br />Jessica Zhang<br />
A Bad Example<br />You know those handouts other groups printed and gave out? We did that too. On the handouts are URLs th...
Gotcha!<br />Just kidding. We actually gave a few of you money to buy those handouts. The democratization of information t...
Summary<br /><ul><li>What is a monopoly?
What enables a monopoly?
Monopoly vs. Perfect Competition (and price discrimination)
Monopolies and welfare
Monopoly and public policy
URLs</li></li></ul><li>So, what is a Monopoly?<br />&quot;A firm is a monopoly if it is the sole seller of its product and...
Barriers, Barriers, Barriers<br />Monopolies exist because of one thing: Barriers.<br />Barriers come in three flavors<br ...
Monopoly vs. Perfect Competition, Part I<br />Monopoly<br /><ul><li>Just one firm
Marginal Revenue > Price (Goodbye, Mr. Darp)
Price > MC
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Monopolies

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Presented 1/13/2010

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Monopolies

  1. 1. Monopoly <br />(Chapter 15)<br />Presentation by<br />Ismail Ali and<br />Jessica Zhang<br />
  2. 2. A Bad Example<br />You know those handouts other groups printed and gave out? We did that too. On the handouts are URLs that we think will help you study for the Econ final. Thing is, we&apos;ve got money in mind. A handout costs $1. Be quick, though. We&apos;ve only printed ten copies.<br />
  3. 3. Gotcha!<br />Just kidding. We actually gave a few of you money to buy those handouts. The democratization of information that may have just followed is what happens over a much longer timespan in real monopolies. If you&apos;ve succumbed to groupthink and bought one without us asking beforehand, let us know and we&apos;ll return it. We&apos;ll show you the URLs later.<br />
  4. 4. Summary<br /><ul><li>What is a monopoly?
  5. 5. What enables a monopoly?
  6. 6. Monopoly vs. Perfect Competition (and price discrimination)
  7. 7. Monopolies and welfare
  8. 8. Monopoly and public policy
  9. 9. URLs</li></li></ul><li>So, what is a Monopoly?<br />&quot;A firm is a monopoly if it is the sole seller of its product and if its product does not have close substitutes.&quot;<br />Translation: The only seller of a product that hasn&apos;t been duplicated<br />Examples: The DMV, Northend, etc.<br />
  10. 10. Barriers, Barriers, Barriers<br />Monopolies exist because of one thing: Barriers.<br />Barriers come in three flavors<br />1. Key resource for just one firm<br />2. The guv&apos;ment<br />3. Costs of production=efficiency (economies of scale)<br />
  11. 11. Monopoly vs. Perfect Competition, Part I<br />Monopoly<br /><ul><li>Just one firm
  12. 12. Marginal Revenue > Price (Goodbye, Mr. Darp)
  13. 13. Price > MC
  14. 14. Not welfare-maximizing
  15. 15. No entry
  16. 16. Long-run profits possible
  17. 17. Price discrimination doable
  18. 18. Price maker</li></li></ul><li>Monopoly vs. Perfect Competition, Part II<br />Perfect Competition<br /><ul><li>Many firms
  19. 19. Marginal Revenue = Price
  20. 20. Price = MC
  21. 21. Welfare-maximizing
  22. 22. Easy entry
  23. 23. Long-run profits impossible
  24. 24. Price discrimination not doable
  25. 25. Price taker</li></li></ul><li>Monopoly vs. Perfect Competition, Part III<br />Both<br /><ul><li>Goal: Maximize profit$ (Awwww, yeaaaah)
  26. 26. Profit Maximization where Marginal Revenue = Marginal Cost
  27. 27. Short-run profits possible</li></li></ul><li>Monopoly vs. Perfect Competition, Part IV<br />Price Discrimination<br /><ul><li>Not possible for perfect competition
  28. 28. (Market power is a must)
  29. 29. Solves deadweight loss
  30. 30. Eliminates inefficiency</li></ul>Examples: movie tickets, financial aid, quantity discounts<br />
  31. 31. What does a Monopoly do for Welfare?<br />In short,<br /><ul><li>Benefit Monopolists (high producer surplus)
  32. 32. Does not maximize total economic well being like competitive markets</li></li></ul><li>Government and Monopoly<br />(&quot;Democratizing Monopolies&quot;)<br />Governments can:<br /><ul><li>Make the market more competitive
  33. 33. Regulate monopoly behavior
  34. 34. Take control (public ownership)
  35. 35. Do zilch</li></li></ul><li>The End<br />The URLs are studyforecon.wordpress.com and slideshare.net/ismailzali.<br />They&apos;re on Facebook as well.<br />Questions?<br />
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