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Monopolies

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Presented 1/13/2010

Presented 1/13/2010


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Transcript

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