A monopoly is defined by a single seller facing the entire market demand. It sells a unique product and has extremely high barriers to entry that protect it from competition. Barriers include ownership of essential resources, legal protections like patents or licenses, and economies of scale. A natural monopoly arises when a single firm can produce at a lower average cost than multiple firms due to economies of scale. The monopolist is a price maker that searches its demand curve to find the profit-maximizing price where marginal revenue equals marginal cost. While monopolies may earn long-run profits, their higher prices and lower output compared to competition are economically inefficient.
The key characteristics of perfect competition are:
1) Many small firms
2) Homogeneous (identical) products
3) Free entry and exit from the market
4) Price-taking behavior
The correct answer is b. Perfect competition is characterized by homogeneous (identical) products, not a great variety of different products.
10 monopolistic competition and oligopolyNepDevWiki
Monopolistic competition and oligopoly belong to the category of imperfect competition. Monopolistic competition is characterized by many small sellers, differentiated products, and easy entry and exit. Firms have a negligible effect on price but some control over their own prices. In the short run, firms may earn economic profits, losses, or normal profits, but in the long run normal profits are earned. Oligopoly is characterized by few sellers, homogeneous or differentiated products, and difficult entry. Firms are interdependent and may engage in price leadership, nonprice competition, or form cartels which are prone to cheating. Both market structures allocate resources inefficiently compared to perfect competition.
This document provides an overview of monopolistic competition and oligopoly market structures. It discusses key characteristics of each including:
1) Monopolistic competition is characterized by many small sellers, differentiated products, and easy entry and exit. Firms compete through non-price factors like advertising and product quality.
2) Oligopoly is dominated by a few large firms producing either homogeneous or differentiated products. Entry is difficult due to barriers like economies of scale. Firms must consider competitors' potential reactions in their pricing decisions.
3) Game theory, such as the prisoner's dilemma, can model strategic interactions between oligopolistic competitors who are mutually interdependent. Firms must choose strategies without communicating directly with rivals.
This document discusses monopolistic competition and oligopoly. It begins by outlining the topics to be discussed, which include monopolistic competition, oligopoly, price competition, and the prisoner's dilemma as it relates to oligopolistic pricing. It then provides characteristics and examples of monopolistic competition, including differentiated products with free entry and exit. It analyzes a monopolistically competitive firm's behavior and profits in the short and long run. It also discusses oligopoly characteristics like having a small number of firms and barriers to entry. It provides examples of oligopolistic industries and analyzes oligopoly models including Cournot, Bertrand, and Stackelberg. It concludes with a pricing problem scenario involving Procter & Gamble, K
Monopolistic competition and oligopoly are two market structures between perfect competition and monopoly. Monopolistic competition is characterized by many firms with differentiated products. Firms have some market power but no barriers to entry or exit. Oligopoly is characterized by a few dominant firms where the behavior of one firm depends on its competitors. Game theory is used to analyze strategic interactions among oligopolistic firms.
Oligopoly is a market structure with a small number of firms that interact strategically. Firms must consider competitors' actions when making decisions. Entry is difficult due to requirements for large investments. Firms may produce homogeneous or differentiated products. Pricing is complex and interdependent, as firms watch each other closely to avoid price wars. Collusion, either explicitly through cartels or tacitly, often emerges to increase profits through coordinated pricing and output decisions.
6 price and output determination- monopolydannygriff1
This document discusses monopoly markets, including conditions that lead to monopoly, how monopolies differ from perfect competition in terms of price and output, the relationship between elasticity and monopoly pricing. It also covers the three degrees of price discrimination and how monopolies can calculate profit maximizing price and output levels.
Monopoly - Profit-Maximization in Monopoly - EconomicsFaHaD .H. NooR
Monopoly Economics
A monopoly (from Greek μόνος mónos ["alone" or "single"] and πωλεῖν pōleîn ["to sell"]) exists when a specific person or enterprise is the only supplier of a particular commodity. This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few sellers dominating a market).[2] Monopolies are thus characterized by a lack of economic competition to produce the good or service, a lack of viable substitute goods, and the possibility of a high monopoly price well above the seller's marginal cost that leads to a high monopoly profit.[3] The verb monopolise or monopolize refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power to charge overly high prices.[4] Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market).[4]
A monopoly is distinguished from a monopsony, in which there is only one buyer of a product or service; a monopoly may also have monopsony control of a sector of a market. Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. Monopolies, monopsonies and oligopolies are all situations in which one or a few entities have market power and therefore interact with their customers (monopoly or oligopoly), or suppliers (monopsony) in ways that distort the market.[citation needed]
Monopolies can be established by a government, form naturally, or form by integration.
In many jurisdictions, competition laws restrict monopolies. Holding a dominant position or a monopoly in a market is often not illegal in itself, however certain categories of behavior can be considered abusive and therefore incur legal sanctions when business is dominant. A government-granted monopoly or legal monopoly, by contrast, is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic interest group. Patents, copyrights, and trademarks are sometimes used as examples of government-granted monopolies. The government may also reserve the venture for itself, thus forming a government monopoly
The key characteristics of perfect competition are:
1) Many small firms
2) Homogeneous (identical) products
3) Free entry and exit from the market
4) Price-taking behavior
The correct answer is b. Perfect competition is characterized by homogeneous (identical) products, not a great variety of different products.
10 monopolistic competition and oligopolyNepDevWiki
Monopolistic competition and oligopoly belong to the category of imperfect competition. Monopolistic competition is characterized by many small sellers, differentiated products, and easy entry and exit. Firms have a negligible effect on price but some control over their own prices. In the short run, firms may earn economic profits, losses, or normal profits, but in the long run normal profits are earned. Oligopoly is characterized by few sellers, homogeneous or differentiated products, and difficult entry. Firms are interdependent and may engage in price leadership, nonprice competition, or form cartels which are prone to cheating. Both market structures allocate resources inefficiently compared to perfect competition.
This document provides an overview of monopolistic competition and oligopoly market structures. It discusses key characteristics of each including:
1) Monopolistic competition is characterized by many small sellers, differentiated products, and easy entry and exit. Firms compete through non-price factors like advertising and product quality.
2) Oligopoly is dominated by a few large firms producing either homogeneous or differentiated products. Entry is difficult due to barriers like economies of scale. Firms must consider competitors' potential reactions in their pricing decisions.
3) Game theory, such as the prisoner's dilemma, can model strategic interactions between oligopolistic competitors who are mutually interdependent. Firms must choose strategies without communicating directly with rivals.
This document discusses monopolistic competition and oligopoly. It begins by outlining the topics to be discussed, which include monopolistic competition, oligopoly, price competition, and the prisoner's dilemma as it relates to oligopolistic pricing. It then provides characteristics and examples of monopolistic competition, including differentiated products with free entry and exit. It analyzes a monopolistically competitive firm's behavior and profits in the short and long run. It also discusses oligopoly characteristics like having a small number of firms and barriers to entry. It provides examples of oligopolistic industries and analyzes oligopoly models including Cournot, Bertrand, and Stackelberg. It concludes with a pricing problem scenario involving Procter & Gamble, K
Monopolistic competition and oligopoly are two market structures between perfect competition and monopoly. Monopolistic competition is characterized by many firms with differentiated products. Firms have some market power but no barriers to entry or exit. Oligopoly is characterized by a few dominant firms where the behavior of one firm depends on its competitors. Game theory is used to analyze strategic interactions among oligopolistic firms.
Oligopoly is a market structure with a small number of firms that interact strategically. Firms must consider competitors' actions when making decisions. Entry is difficult due to requirements for large investments. Firms may produce homogeneous or differentiated products. Pricing is complex and interdependent, as firms watch each other closely to avoid price wars. Collusion, either explicitly through cartels or tacitly, often emerges to increase profits through coordinated pricing and output decisions.
6 price and output determination- monopolydannygriff1
This document discusses monopoly markets, including conditions that lead to monopoly, how monopolies differ from perfect competition in terms of price and output, the relationship between elasticity and monopoly pricing. It also covers the three degrees of price discrimination and how monopolies can calculate profit maximizing price and output levels.
Monopoly - Profit-Maximization in Monopoly - EconomicsFaHaD .H. NooR
Monopoly Economics
A monopoly (from Greek μόνος mónos ["alone" or "single"] and πωλεῖν pōleîn ["to sell"]) exists when a specific person or enterprise is the only supplier of a particular commodity. This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few sellers dominating a market).[2] Monopolies are thus characterized by a lack of economic competition to produce the good or service, a lack of viable substitute goods, and the possibility of a high monopoly price well above the seller's marginal cost that leads to a high monopoly profit.[3] The verb monopolise or monopolize refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power to charge overly high prices.[4] Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market).[4]
A monopoly is distinguished from a monopsony, in which there is only one buyer of a product or service; a monopoly may also have monopsony control of a sector of a market. Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. Monopolies, monopsonies and oligopolies are all situations in which one or a few entities have market power and therefore interact with their customers (monopoly or oligopoly), or suppliers (monopsony) in ways that distort the market.[citation needed]
Monopolies can be established by a government, form naturally, or form by integration.
In many jurisdictions, competition laws restrict monopolies. Holding a dominant position or a monopoly in a market is often not illegal in itself, however certain categories of behavior can be considered abusive and therefore incur legal sanctions when business is dominant. A government-granted monopoly or legal monopoly, by contrast, is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic interest group. Patents, copyrights, and trademarks are sometimes used as examples of government-granted monopolies. The government may also reserve the venture for itself, thus forming a government monopoly
1) An oligopoly is characterized by a market with few sellers that are interdependent. Each firm monitors and reacts to the actions of other firms in the industry.
2) Prices in an oligopoly are determined through interdependent pricing, price wars between firms trying to gain market share, price leadership where one dominant firm sets prices that others follow, or formal agreements like cartels to limit competition.
3) The kinked demand curve model suggests firms in an oligopoly face a discontinuous demand curve, leading to price rigidity as raising or lowering prices would decrease total revenue along the elastic or inelastic portions of the demand curve.
The document discusses various pricing strategies firms can use when they have market power, including price discrimination, peak-load pricing, and two-part tariffs. It explains how firms can segment markets and charge different prices to maximize profits by capturing consumer surplus. Specifically, it covers first-degree, second-degree, and third-degree price discrimination, and discusses examples like airlines, movies, and electricity pricing. The two-part tariff is introduced as a strategy to separate the decision to purchase a good into two prices: a fixed entry fee and a variable usage fee.
- A monopoly is a sole seller in a market that faces a downward-sloping demand curve. It is a price maker unlike competitive firms.
- A monopoly maximizes profits by producing where marginal revenue equals marginal cost and charging a price above marginal cost.
- This results in a lower quantity and higher price than would be socially optimal, causing deadweight loss.
- Governments address monopoly power through antitrust laws, regulation, or public ownership to increase competition and efficiency.
This document discusses oligopoly, which is a market structure with a small number of firms that produce similar or differentiated products. There are barriers to entry in oligopoly markets. The document outlines two models of oligopoly - the traditional kinked demand curve model and dominant firm oligopoly model, as well as game theory models like the prisoner's dilemma. It also discusses how firms in oligopoly markets can collude by agreeing to restrict output and raise prices to increase profits. Measures of concentration like the four-firm concentration ratio and Herfindahl-Hirschman Index are presented to determine the level of competition in a market.
This document discusses oligopolistic market structures and provides examples of cartels. It summarizes that an oligopoly is characterized by a small number of firms producing either homogeneous or heterogeneous products. A cartel is an explicit agreement among firms in an oligopoly to fix prices, output levels, or market shares. Examples of successful cartels mentioned are OPEC and De Beers. The document also discusses collusion, game theory, and provides an example of cellular operators in India engaging in collusive practices.
The document discusses monopolistic competition and the four market structures. It provides details on the characteristics of each market structure, including the number of firms, type of product, ease of entry, examples of each structure, and diagrams of demand, marginal revenue, marginal cost, and profit in the different structures. It also covers the short run and long run in monopolistic competition, how demand flattens in the long run, and the impact on price, quantity, and profits.
II.) Monopolistic competition is characterized by many small businesses that produce differentiated products with weak barriers to entry. In the short run, firms behave similarly to monopolies by producing where marginal revenue equals marginal cost. However, in the long run competition drives economic profits to zero as entry and exit occurs. While monopolistic competition provides variety for consumers, it is less efficient than perfect competition due to excess capacity and markups pricing above marginal cost.
This document provides an overview of monopolistic competition and oligopoly market structures. It discusses key concepts such as product differentiation, advertising, pricing and output determination under monopolistic competition. It also examines oligopoly models including collusion, Cournot, and kinked demand curve models. It notes that oligopolies can be inefficient due to pricing above marginal cost, strategic behavior wasting resources, and potential for advertising waste. Government regulation aims to limit mergers that reduce competition.
This document is about imperfect competition and monopoly. It defines imperfect competition as situations where individual sellers can influence the price of their output, such as in oligopolies and monopolistic competition. Monopoly is described as a market with a single seller who can set price without competition. The document includes a graphical depiction of demand curves under perfect versus imperfect competition. It notes there are many varieties of imperfect competitors in an economy, from fast-changing tech industries to more stable funeral services. Finally, it outlines that monopolies have single production of a unique product and can earn economic profits by setting price without rival firms.
The document discusses market structures including monopolistic competition and oligopoly. It provides examples and characteristics of each, and analyzes firm behavior in the short and long run under monopolistic competition using graphs. It then discusses oligopoly, providing the Cournot model as an example where firms determine output based on what competitors will produce. Equilibrium is reached when outputs are consistent with each firm's reaction curve. Collusion and the Stackelberg model, where one firm moves first, are also examined.
Monopoly is a market structure where there is only one seller of a product or service. Examples include public utilities like electricity and water.
Under monopoly, the firm faces a downward sloping demand curve and sets a price where marginal revenue equals marginal cost to maximize profits. This price is generally higher and quantity lower than under perfect competition.
Price discrimination is when a monopolist charges different prices to different customers, even though the cost of production is the same. It allows a firm to extract more consumer surplus. Conditions for effective price discrimination include the ability to segment markets and prevent resale.
This document discusses the concept of oligopoly and provides examples. It defines oligopoly as a market structure with a few firms and many buyers. It notes that firms in an oligopoly are mutually interdependent and considers factors like price, competition, relationships between firms, and economic scale. It provides graphs to illustrate concepts like kinked demand curves and marginal revenue curves. It gives common examples of oligopolistic industries and compares oligopoly to monopoly, perfect competition, and monopolistic competition.
This document discusses monopoly and monopolistic competition. It defines monopoly as a market with a single seller and significant barriers to entry. A monopoly is also known as a price maker and can set prices to maximize profits. Under monopolistic competition, there are many sellers but their products are differentiated. While products are substitutes, they are not perfect substitutes. Firms in monopolistic competition compete through non-price factors like branding and marketing.
This document provides an overview of monopoly and price discrimination. It discusses how monopolists determine output levels by producing where marginal revenue equals marginal cost. This results in lower output and higher prices than under perfect competition, creating deadweight loss. The document also examines how patents can encourage innovation by granting temporary monopoly power but can also prolong monopolies. It defines price discrimination as charging different prices to different consumer groups and explains how firms can increase profits through third-degree price discrimination by dividing the market and applying the marginal principle separately to each group. Examples of price discrimination include senior citizen discounts and hardcover vs paperback book pricing.
1. The document discusses competitive markets and how firms make production decisions within them. It uses the examples of a local gas station and water company to illustrate the differences between competitive and non-competitive markets.
2. A competitive market is defined as having many small buyers and sellers, as well as goods/services that are essentially identical. In such a market, no single actor can influence prices. Firms are price takers rather than price makers.
3. The chapter analyzes how competitive firms maximize profits by equating their marginal revenue with their marginal costs of production. Total revenue for a competitive firm is determined by market price multiplied by quantity sold. Both average and marginal revenue for a competitive firm equal the market price.
This document discusses monopoly and monopoly power. It begins by reviewing perfect competition and then defines monopoly as a market with one seller and many buyers of a unique product where there are barriers to entry. A monopolist maximizes profits by producing where marginal revenue equals marginal cost. The document provides examples of how a monopolist determines output and price. It also discusses how a monopolist may respond to shifts in demand and the effects of taxes. The document notes that multi-plant firms will equalize marginal costs across plants. While true monopoly is rare, oligopolistic markets can exhibit monopoly power if firms have downward sloping demand curves. The Lerner Index is introduced as a way to measure monopoly power.
The key steps are:
1) Find where MC = MR (the equilibrium point) to determine optimal output
2) Drop down from the equilibrium point to the ATC curve to find the profit per unit
3) Multiply profit per unit by output to find total profit
So in summary, the graph shows how to determine optimal output, profit per unit, and total profit by comparing MC, MR, and ATC curves. The intersection of MC=MR gives the profit-maximizing quantity, and comparing that to ATC gives the profit amount.
A document outlines key concepts regarding monopoly, including:
1) A monopoly is characterized by a single seller in the market with no close substitutes who acts as a price maker and can block entry of new competitors.
2) A monopoly faces a downward sloping demand curve and can only increase sales by lowering price across all units sold. As a result, marginal revenue is always below price.
3) A profit-maximizing monopoly will produce at the quantity where marginal revenue equals marginal cost and charge the price dictated by the demand curve at that quantity of output.
Here are the key points about costly price discrimination:
- If price discrimination involves costs, it may no longer be profitable for the firm to engage in it. The costs of discrimination must be less than the additional profits it generates.
- As discrimination costs rise, the firm will find it optimal to discriminate less, charging a smaller number of different prices or targeting fewer customer groups. In the limit of very high costs, it may charge a single undifferentiated price.
- This means the firm's output and total welfare may be lower when price discrimination is costly compared to if it could costlessly perfectly price discriminate. Output could fall short of the efficient competitive level.
- Consumers who are charged higher prices as
This document provides information on an upcoming two-day law series masterclass on issues, challenges, and implications of competition law in Malaysia. The masterclass will cover topics such as cartels, prohibited agreements, abuse of dominance, investigations and enforcement by the Malaysian Competition Commission (MyCC). It will help participants understand Malaysia's Competition Act 2010 which takes effect on January 1, 2012 and risks of non-compliance such as substantial financial penalties. The event aims to educate senior management and legal advisors of businesses about competition law and compliance.
The Alcoa case of 1945 was the first case where the Supreme Court applied the per se rule to find a violation of the Sherman Act based solely on the existence of monopoly power, without evidence of predatory behavior.
73
12. Which of the following is an example of
a vertical merger?
a. A merger between two automobile
manufacturers.
b. A merger between an automobile
manufacturer and a tire manufacturer.
c. A merger between an automobile
manufacturer and a computer software firm.
d. A merger between two tire manufacturers.
B. A vertical merger is between firms at different stages of production, such as a manufacturer and its supplier. Option B is the only example of a vertical merger.
The document summarizes key concepts and provisions of US antitrust laws, including the Sherman Act and Clayton Act. It discusses prohibited activities like price fixing, monopolization, and mergers. It also outlines enforcement agencies and private rights of action under antitrust laws, as well as statutory exemptions.
1) An oligopoly is characterized by a market with few sellers that are interdependent. Each firm monitors and reacts to the actions of other firms in the industry.
2) Prices in an oligopoly are determined through interdependent pricing, price wars between firms trying to gain market share, price leadership where one dominant firm sets prices that others follow, or formal agreements like cartels to limit competition.
3) The kinked demand curve model suggests firms in an oligopoly face a discontinuous demand curve, leading to price rigidity as raising or lowering prices would decrease total revenue along the elastic or inelastic portions of the demand curve.
The document discusses various pricing strategies firms can use when they have market power, including price discrimination, peak-load pricing, and two-part tariffs. It explains how firms can segment markets and charge different prices to maximize profits by capturing consumer surplus. Specifically, it covers first-degree, second-degree, and third-degree price discrimination, and discusses examples like airlines, movies, and electricity pricing. The two-part tariff is introduced as a strategy to separate the decision to purchase a good into two prices: a fixed entry fee and a variable usage fee.
- A monopoly is a sole seller in a market that faces a downward-sloping demand curve. It is a price maker unlike competitive firms.
- A monopoly maximizes profits by producing where marginal revenue equals marginal cost and charging a price above marginal cost.
- This results in a lower quantity and higher price than would be socially optimal, causing deadweight loss.
- Governments address monopoly power through antitrust laws, regulation, or public ownership to increase competition and efficiency.
This document discusses oligopoly, which is a market structure with a small number of firms that produce similar or differentiated products. There are barriers to entry in oligopoly markets. The document outlines two models of oligopoly - the traditional kinked demand curve model and dominant firm oligopoly model, as well as game theory models like the prisoner's dilemma. It also discusses how firms in oligopoly markets can collude by agreeing to restrict output and raise prices to increase profits. Measures of concentration like the four-firm concentration ratio and Herfindahl-Hirschman Index are presented to determine the level of competition in a market.
This document discusses oligopolistic market structures and provides examples of cartels. It summarizes that an oligopoly is characterized by a small number of firms producing either homogeneous or heterogeneous products. A cartel is an explicit agreement among firms in an oligopoly to fix prices, output levels, or market shares. Examples of successful cartels mentioned are OPEC and De Beers. The document also discusses collusion, game theory, and provides an example of cellular operators in India engaging in collusive practices.
The document discusses monopolistic competition and the four market structures. It provides details on the characteristics of each market structure, including the number of firms, type of product, ease of entry, examples of each structure, and diagrams of demand, marginal revenue, marginal cost, and profit in the different structures. It also covers the short run and long run in monopolistic competition, how demand flattens in the long run, and the impact on price, quantity, and profits.
II.) Monopolistic competition is characterized by many small businesses that produce differentiated products with weak barriers to entry. In the short run, firms behave similarly to monopolies by producing where marginal revenue equals marginal cost. However, in the long run competition drives economic profits to zero as entry and exit occurs. While monopolistic competition provides variety for consumers, it is less efficient than perfect competition due to excess capacity and markups pricing above marginal cost.
This document provides an overview of monopolistic competition and oligopoly market structures. It discusses key concepts such as product differentiation, advertising, pricing and output determination under monopolistic competition. It also examines oligopoly models including collusion, Cournot, and kinked demand curve models. It notes that oligopolies can be inefficient due to pricing above marginal cost, strategic behavior wasting resources, and potential for advertising waste. Government regulation aims to limit mergers that reduce competition.
This document is about imperfect competition and monopoly. It defines imperfect competition as situations where individual sellers can influence the price of their output, such as in oligopolies and monopolistic competition. Monopoly is described as a market with a single seller who can set price without competition. The document includes a graphical depiction of demand curves under perfect versus imperfect competition. It notes there are many varieties of imperfect competitors in an economy, from fast-changing tech industries to more stable funeral services. Finally, it outlines that monopolies have single production of a unique product and can earn economic profits by setting price without rival firms.
The document discusses market structures including monopolistic competition and oligopoly. It provides examples and characteristics of each, and analyzes firm behavior in the short and long run under monopolistic competition using graphs. It then discusses oligopoly, providing the Cournot model as an example where firms determine output based on what competitors will produce. Equilibrium is reached when outputs are consistent with each firm's reaction curve. Collusion and the Stackelberg model, where one firm moves first, are also examined.
Monopoly is a market structure where there is only one seller of a product or service. Examples include public utilities like electricity and water.
Under monopoly, the firm faces a downward sloping demand curve and sets a price where marginal revenue equals marginal cost to maximize profits. This price is generally higher and quantity lower than under perfect competition.
Price discrimination is when a monopolist charges different prices to different customers, even though the cost of production is the same. It allows a firm to extract more consumer surplus. Conditions for effective price discrimination include the ability to segment markets and prevent resale.
This document discusses the concept of oligopoly and provides examples. It defines oligopoly as a market structure with a few firms and many buyers. It notes that firms in an oligopoly are mutually interdependent and considers factors like price, competition, relationships between firms, and economic scale. It provides graphs to illustrate concepts like kinked demand curves and marginal revenue curves. It gives common examples of oligopolistic industries and compares oligopoly to monopoly, perfect competition, and monopolistic competition.
This document discusses monopoly and monopolistic competition. It defines monopoly as a market with a single seller and significant barriers to entry. A monopoly is also known as a price maker and can set prices to maximize profits. Under monopolistic competition, there are many sellers but their products are differentiated. While products are substitutes, they are not perfect substitutes. Firms in monopolistic competition compete through non-price factors like branding and marketing.
This document provides an overview of monopoly and price discrimination. It discusses how monopolists determine output levels by producing where marginal revenue equals marginal cost. This results in lower output and higher prices than under perfect competition, creating deadweight loss. The document also examines how patents can encourage innovation by granting temporary monopoly power but can also prolong monopolies. It defines price discrimination as charging different prices to different consumer groups and explains how firms can increase profits through third-degree price discrimination by dividing the market and applying the marginal principle separately to each group. Examples of price discrimination include senior citizen discounts and hardcover vs paperback book pricing.
1. The document discusses competitive markets and how firms make production decisions within them. It uses the examples of a local gas station and water company to illustrate the differences between competitive and non-competitive markets.
2. A competitive market is defined as having many small buyers and sellers, as well as goods/services that are essentially identical. In such a market, no single actor can influence prices. Firms are price takers rather than price makers.
3. The chapter analyzes how competitive firms maximize profits by equating their marginal revenue with their marginal costs of production. Total revenue for a competitive firm is determined by market price multiplied by quantity sold. Both average and marginal revenue for a competitive firm equal the market price.
This document discusses monopoly and monopoly power. It begins by reviewing perfect competition and then defines monopoly as a market with one seller and many buyers of a unique product where there are barriers to entry. A monopolist maximizes profits by producing where marginal revenue equals marginal cost. The document provides examples of how a monopolist determines output and price. It also discusses how a monopolist may respond to shifts in demand and the effects of taxes. The document notes that multi-plant firms will equalize marginal costs across plants. While true monopoly is rare, oligopolistic markets can exhibit monopoly power if firms have downward sloping demand curves. The Lerner Index is introduced as a way to measure monopoly power.
The key steps are:
1) Find where MC = MR (the equilibrium point) to determine optimal output
2) Drop down from the equilibrium point to the ATC curve to find the profit per unit
3) Multiply profit per unit by output to find total profit
So in summary, the graph shows how to determine optimal output, profit per unit, and total profit by comparing MC, MR, and ATC curves. The intersection of MC=MR gives the profit-maximizing quantity, and comparing that to ATC gives the profit amount.
A document outlines key concepts regarding monopoly, including:
1) A monopoly is characterized by a single seller in the market with no close substitutes who acts as a price maker and can block entry of new competitors.
2) A monopoly faces a downward sloping demand curve and can only increase sales by lowering price across all units sold. As a result, marginal revenue is always below price.
3) A profit-maximizing monopoly will produce at the quantity where marginal revenue equals marginal cost and charge the price dictated by the demand curve at that quantity of output.
Here are the key points about costly price discrimination:
- If price discrimination involves costs, it may no longer be profitable for the firm to engage in it. The costs of discrimination must be less than the additional profits it generates.
- As discrimination costs rise, the firm will find it optimal to discriminate less, charging a smaller number of different prices or targeting fewer customer groups. In the limit of very high costs, it may charge a single undifferentiated price.
- This means the firm's output and total welfare may be lower when price discrimination is costly compared to if it could costlessly perfectly price discriminate. Output could fall short of the efficient competitive level.
- Consumers who are charged higher prices as
This document provides information on an upcoming two-day law series masterclass on issues, challenges, and implications of competition law in Malaysia. The masterclass will cover topics such as cartels, prohibited agreements, abuse of dominance, investigations and enforcement by the Malaysian Competition Commission (MyCC). It will help participants understand Malaysia's Competition Act 2010 which takes effect on January 1, 2012 and risks of non-compliance such as substantial financial penalties. The event aims to educate senior management and legal advisors of businesses about competition law and compliance.
The Alcoa case of 1945 was the first case where the Supreme Court applied the per se rule to find a violation of the Sherman Act based solely on the existence of monopoly power, without evidence of predatory behavior.
73
12. Which of the following is an example of
a vertical merger?
a. A merger between two automobile
manufacturers.
b. A merger between an automobile
manufacturer and a tire manufacturer.
c. A merger between an automobile
manufacturer and a computer software firm.
d. A merger between two tire manufacturers.
B. A vertical merger is between firms at different stages of production, such as a manufacturer and its supplier. Option B is the only example of a vertical merger.
The document summarizes key concepts and provisions of US antitrust laws, including the Sherman Act and Clayton Act. It discusses prohibited activities like price fixing, monopolization, and mergers. It also outlines enforcement agencies and private rights of action under antitrust laws, as well as statutory exemptions.
Microsoft faced antitrust lawsuits in the late 1990s and early 2000s due to its dominance in the personal computer software market. The U.S. Department of Justice and several state attorneys general alleged that Microsoft abused monopoly power in operating systems and browsers. A trial court found that Microsoft held a monopoly and violated antitrust laws. The case resulted in a settlement requiring Microsoft to share application programming interfaces with competitors and allow more customer choice.
1) A monopolist can maximize profits through price discrimination by setting different prices for different customer groups or quantities purchased (1st, 2nd, 3rd degree price discrimination).
2) Under 3rd degree price discrimination, the monopolist sets prices so that the marginal revenue in each customer group is equal to marginal cost to maximize total revenue. The higher price is set for the group with less elastic demand.
3) A two-part tariff consisting of a fixed fee equal to consumer surplus plus a per-unit price equal to marginal cost allows a monopolist to extract all gains from trade and achieve an efficient market outcome.
This document provides an overview of monopoly market structure. It defines a monopoly as a market with a single seller of a product. Examples are given and key characteristics of monopolies are outlined, such as being a price maker and having high barriers to entry. The document compares profit maximization for competitive firms versus monopolies. It shows graphically how monopolies set price above marginal cost to maximize profits, whereas competitive firms set price equal to marginal cost. Finally, it explains that abnormal profits for monopolies disappear in the long run as demand declines with entry of new competitors.
- A monopoly is a market with a single seller. As a monopolist increases output, it lowers the market price.
- Monopolies can form due to legal protections, patents, sole ownership of resources, cartel formation, or large economies of scale.
- To maximize profits, a monopolist produces the quantity where marginal revenue equals marginal cost.
- As the elasticity of demand increases (becomes less negative), a monopolist will raise prices to exploit consumers' less elastic demand.
- A profits tax does not affect a monopolist's output decisions, but a per-unit quantity tax lowers output and raises prices by increasing marginal costs.
The document discusses key features and concepts related to monopolies, including how they arise and profit maximization strategies. It explains that monopolies have a single seller, no close substitutes, control price as a price maker, and may arise due to barriers to entry like legal restrictions or economies of scale. The document also covers natural monopolies, profit maximization under monopoly versus competition, equilibrium differences, short-run losses, monopoly supply curves, deadweight loss, and different degrees of price discrimination.
This document discusses labor relations and collective bargaining in sports. It covers topics such as antitrust laws like the Sherman Antitrust Act of 1890 and how they relate to labor acts and unions in sports. Collective bargaining agreements (CBAs) are formed out of negotiations between sports leagues and player unions, and outline the rights of both sides. When CBAs expire and new agreements cannot be reached, it can lead to strikes or lockouts that impact the league and all parties involved. The 1994 MLB strike is provided as an example of the lasting impacts a strike can have on revenue, attendance, and fan support.
Day 1 Intro to CCP and Competition Law in PakistanAhmed Qadir
The document discusses the importance of competition in developing countries and the need for competition laws. It provides background on competition laws in Pakistan, from the original 1970 law to the current 2010 Competition Act. The current law established the Competition Commission of Pakistan and prohibits anti-competitive behaviors such as abuse of dominant market position, cartelization through prohibited agreements, deceptive marketing practices, and mergers or acquisitions that substantially lessen competition. It also stresses the importance of advocacy and increasing awareness of competition laws.
This document provides an overview of monopoly as a market structure. It defines monopoly and barriers to entry. It then examines monopoly in the short-run and long-run, including profit maximization where marginal revenue equals marginal cost. The document discusses the advantages of monopoly in terms of lower costs from economies of scale but also the disadvantages, including inefficient allocation of resources and deadweight loss compared to perfect competition. It concludes by introducing the concept of price discriminating monopolies.
The document summarizes key concepts about monopoly market structure:
1) A monopoly is characterized by a single seller, significant barriers to entry, and no close substitutes for the product. It faces a downward-sloping demand curve and can influence prices.
2) In the short-run, a monopoly will produce where marginal revenue equals marginal cost to maximize profits, earning normal profits, supernormal profits, or losses.
3) In the long-run, the monopoly may adjust its scale of production to maximize profits or minimize losses. It can earn economic profits but also imposes social costs like deadweight loss.
4) The document also discusses price discrimination, where a monopoly charges different prices for
1) A monopoly is a market structure with a single seller of a product without close substitutes.
2) The key characteristics of a monopoly are that it is the sole price maker and faces a downward sloping demand curve, unlike competitive firms which are price takers.
3) Barriers to entry, such as government licenses, large economies of scale, or ownership of key resources allow monopolies to exist by preventing competition from entering the market.
Monopoly is defined as a market situation where there is a single seller with complete control over an industry. Key features of monopoly include a single seller, price discrimination, lack of close substitutes, and restricted market entry. True monopolies generally exist in government controlled markets or through legal barriers like patents and copyrights that provide opportunities to monopolize a market. The Tata Nano is an example of a monopoly in its market segment as Tata is the only seller and there are no close substitutes, along with barriers to entry.
The document is a chapter from an economics textbook about monopoly. It begins with an introduction to monopoly and outlines the key learning objectives that will be covered, which include identifying situations that give rise to monopoly, how monopolists determine output and price, and evaluating monopoly profits. The chapter then provides definitions of key monopoly terms like barriers to entry and outlines how monopolists differ from perfect competitors in facing a downward sloping demand curve rather than flat demand. It discusses how monopolists determine the profit maximizing price and output level by equating marginal revenue and marginal cost.
This document provides an overview of Chapter 8 from the textbook Microeconomics by R. Glenn Hubbard and Anthony Patrick O'Brien. The chapter outline lists the learning objectives, which include understanding the different types of firms, the structure of corporations and the principal-agent problem, how firms raise funds, analyzing corporate financial statements, and the role of corporate governance in the 2007-2009 financial crisis. The document provides definitions and explanations of these topics through excerpted text and diagrams from the textbook chapter.
This document summarizes key concepts from a chapter on international trade. It discusses comparative advantage and how countries can gain from trade by specializing in goods where they have a comparative advantage. While comparative advantage is based on opportunity costs of production, in practice countries do not completely specialize because not all goods are traded, production faces increasing opportunity costs, and countries seek to maintain some domestic production of essential goods.
- Best Buy aired a Super Bowl commercial featuring Justin Bieber and Ozzy Osbourne to announce its new "Buy Back" program, which allows customers to return electronics within two years and upgrade to a newer model.
- The success of celebrity endorsements may rely on the relevance of the celebrity to the product. Firms must understand consumer behavior to determine effective marketing strategies.
- An article in the chapter will discuss if endorsements from celebrities like Jennifer Lopez and Charlie Sheen can help or hurt a brand.
perfect competition, monopoly, monopolistic and oligopolysandypkapoor
Price determination under different market structure and characterstics of all these market stractures along with graphical presentation of Perfect competition, Monopoly, Monopolistic and Oligopoly market structue
This document discusses monopolies and profit maximization under monopoly. It begins by asking several questions about why monopolies arise, how monopolies choose price and quantity, and what governments can do about monopolies. It then defines a monopoly and explains that monopolies arise due to barriers to entry in the market. A monopoly faces a downward-sloping demand curve and sets price and quantity by producing where marginal revenue equals marginal cost. This results in the monopoly price being above marginal cost and a deadweight loss to society.
The document discusses monopolies and imperfect competition. It defines monopolies as markets with a single seller and high barriers to entry. Monopolies are inefficient as they produce less output and charge higher prices than would occur under perfect competition. This results in deadweight loss to society. The government may regulate monopolies through price ceilings to increase output and efficiency. Price discrimination is also discussed, which is when a firm charges different prices to different groups of consumers to maximize profits.
A monopoly is a firm that is the sole seller of a product without close substitutes and has market power to influence prices. Monopolies can arise when a firm owns a key resource, the government grants exclusive rights, or large setup costs create natural monopolies. A profit-maximizing monopoly produces where marginal revenue equals marginal cost and charges a price corresponding to the height of the demand curve. This results in deadweight loss since the monopoly underproduces relative to the socially efficient quantity where price equals marginal cost. Governments address monopolies through antitrust laws, regulation, public ownership, or sometimes doing nothing. Price discrimination allows monopolies to further extract consumer surplus and may increase efficiency by eliminating deadweight loss if buyers can be
- A monopoly is a market structure with a single firm that produces all or nearly all of the supply of a good or service. As the sole supplier, a monopoly has complete control over pricing and output decisions.
- A monopoly faces a downward sloping demand curve and sets price based on where marginal revenue equals marginal cost to maximize profits. This generally results in the monopoly producing a smaller quantity and charging a higher price than would occur under perfect competition.
- Barriers to entry like patents, large economies of scale, and predatory pricing allow monopolies to sustain profits over time by preventing other firms from entering the market and competing away those above-normal profits.
This document discusses monopolies and provides examples and analysis. It begins by defining key characteristics of monopolies, including that there is a single firm producing the entire supply of a product without competitors. It then analyzes how a monopolist determines the profit-maximizing level of output and price, finding where marginal revenue equals marginal cost and charging the highest price the market will bear. The document emphasizes that barriers to entry, such as legal harassment, patent protection, exclusive licensing, and bundled products, allow monopolies to exist and earn economic profits.
This document provides an overview of monopoly market structures. It defines monopoly as a market with a single firm and discusses how monopolies exist due to barriers to entry. The key differences between a monopolist and a competitive firm are explained, including how a monopolist's marginal revenue is below price. Models of monopoly are presented graphically and numerically. The document also discusses welfare losses from monopoly power, barriers to entry, price discrimination, and normative views of monopolies.
The document discusses market structures and perfect competition. It defines perfect competition as a market with many small firms, homogeneous products, firms that are price takers, and easy entry and exit. Under perfect competition, firms are price takers and produce where marginal revenue equals marginal cost to maximize profits. In the long run, perfect competition leads to normal profits as firms enter and exit the market.
This document discusses market structures and monopoly. It defines the four basic market structures: perfectly competitive, monopoly, oligopoly, and monopolistic competition. It then focuses on monopoly, describing its key characteristics as having a single firm with no close substitutes and barriers to entry. The document provides examples of sources of monopoly power such as natural monopoly and patents. It also discusses the profit-maximizing rules for a monopoly and how monopolies can price discriminate to enhance profits.
This document provides an overview of pure monopoly, including its key characteristics, examples, and barriers to entry. It also discusses how a pure monopolist determines the profit-maximizing price and output level by setting marginal revenue equal to marginal cost and choosing the quantity where total revenue is maximized. Finally, it examines the economic effects of monopoly, including inefficiency due to underproduction compared to perfect competition.
A monopoly is a firm that is the sole seller of a product without close substitutes. It faces a downward-sloping demand curve and sets price above marginal cost. While a monopoly maximizes profits by producing where marginal cost equals marginal revenue, it produces less than the efficient quantity, resulting in deadweight loss. Governments address monopoly inefficiencies through antitrust laws, price regulation, or public ownership.
The document summarizes the key characteristics of four basic market models: pure competition, monopolistic competition, oligopoly, and monopoly. It provides examples for each model and discusses some factors that allow monopolies to form, such as legal barriers, ownership of essential resources, and economies of scale. The document also compares pure competition to pure monopoly and discusses how monopolies determine profit-maximizing output and price graphically by finding the quantity where marginal revenue equals marginal cost. Finally, it addresses strategies like price discrimination that monopolies may use and policies like lump-sum taxes that could influence monopoly behavior.
This document provides an overview of monopolistic competition and oligopoly market structures. It discusses key aspects of each including:
1) Monopolistic competition is characterized by many small firms producing differentiated products and free entry/exit in the long-run. Firms have some monopoly power in the short-run but compete such that long-run profits are zero.
2) Oligopoly is characterized by a small number of large firms producing either differentiated or homogeneous products. Strategic interactions between firms are important and outcomes depend on factors like the Cournot and Bertrand models of competition.
3) The Prisoner's Dilemma framework is used to analyze how firms may cooperate (collude) or compete
This document provides an overview of imperfect competition and its various forms, including monopolistic competition and oligopoly. It discusses key characteristics of each market structure type, such as the number of firms, ability to influence price, and entry barriers. Examples are given for each type. The essential difference between perfectly and imperfectly competitive firms is explained. Short-run profit maximization is demonstrated for monopolistic competition and monopoly. Demand curves are illustrated for the individual firm under monopolistic competition and monopoly.
This document provides an overview of imperfect competition. It discusses the key characteristics of monopolistic competition, oligopoly, and monopoly market structures. For each structure, it outlines the number of firms, ability to affect price, entry barriers, and examples. The document then examines pricing decisions under imperfect competition and provides examples of the De Beers cartel, which dominated the global diamond industry through controlling supply. In summary, the document analyzes different forms of imperfect competition and pricing models.
A and c are correct. A public good is a good that, once produced, has two properties: (1) users collectively consume benefits and (2) no one can be excluded.
Monopolistic competition is characterized by many small firms that produce differentiated products. In the short run, firms can earn economic profits by producing at a quantity where marginal revenue equals marginal cost. However, in the long run, free entry and exit causes the demand curve to shift left as more firms enter, eliminating economic profits and resulting in normal profits for firms. Firms produce at the minimum point of their average total cost curve where price equals average cost.
Imperfect competition is an economic concept used to describe marketplace conditions that render a market less than perfectly competitive, creating market inefficiencies that result in losses of economic value.
In the real world, markets are nearly always in a condition of imperfect competition to some extent. However, the term is typically only used to describe markets where the level of competition among sellers is substantially below ideal conditions.A situation of imperfect competition exists whenever one of the fundamental characteristics of perfect competition is missing. When there is perfect competition in a market, prices are controlled primarily by the ordinary economic factors of supply and demand.
Notably, the stock market may be viewed as a continually imperfect market because not all investors have ready access to the same level of information regarding potential investments.
Imperfect competition commonly exists when a market structure is in the form of monopolies, duopolies, oligopolies, or monopsony (very rare)
Market structures that effectively render competition imperfect are most often characterized by a lack of competitive suppliers. Imperfect competition often exists as a result of extremely high barriers to entry for new suppliers. For example, the airline industry has high barriers to entry due to the extremely high cost of aircraft.
The most extreme condition of imperfect competition exists when the market for a particular good or service is a monopoly, one in which there is a sole supplier. A supplier that has a monopoly on the provision of a good or service essentially has complete control over prices.
Because it has no competition from other suppliers, the sole supplier can essentially set the price of its goods or services at any level it desires. Monopolies often charge prices that provide them with significantly higher profit margins than most companies operate with.
A duopoly is a market structure in which there are only two suppliers. Although duopolies are somewhat more competitive than monopolies, the level of competition is still far from perfect, as the two suppliers still have significant control of marketplace prices.
An example of a duopoly exists in the United Kingdom’s detergent market, where Procter & Gamble (NYSE: PG) and Unilever (NYSE: UL) are virtually the only suppliers. The two suppliers in a duopoly often collude in price setting.
Oligopolies are much more common than either monopolies or duopolies. In an oligopoly, there are several – but a small, limited number – of suppliers. The market for cell phone service in the United States is an example of an oligopoly, as it is essentially controlled by just a handful of suppliers. The small number of suppliers, which limits buying choices for consumers, provides the suppliers with substantial, although not complete, control over pricing.
A rare form of imperfect competition is monopsony. A monopsony is a single buyer, rather than any supplier.
1) The document discusses key concepts about monopoly, including why monopolies arise due to barriers to entry, how monopolists determine price and quantity differently than competitive firms by equating marginal revenue and marginal cost, and the welfare costs of monopoly markets.
2) It provides examples of monopoly, including DeBeers' control of diamonds and patents granting temporary monopoly power. Price discrimination strategies are also examined.
3) Government policies for dealing with monopolies include promoting competition, regulating prices, and in some cases public ownership of monopolies.
A market can be defined as a group of firms willing and able to sell a similar product or service to the same potential buyers.
Imperfect competition covers all situations where there is neither pure competition nor pure monopoly.
Perfect competition and pure monopoly are very unlikely to be found in the real world.
In the real world, it is the imperfect competition lying between perfect competition and pure monopoly.
The fundamental distinguishing characteristic of imperfect competition is that average revenue curve slopes downwards throughout its length, but it slopes downwards at different rates in different categories of imperfect competition.
Monopoly refers to the market situation where there is a
Single seller selling a product which has no close substitutes.
Monopolies are characterized by a lack of economic competition to produce the good or service, a lack of viable substitute goods, and the existence of a high monopoly price well above the firm's marginal cost that leads to a high monopoly profit
The word “oligopoly” comes from the Greek “oligos” meaning "little or small” and “polein” meaning “to sell.” When “oligos” is used in the plural, it means “few” ,few firms or few sellers.
DEFINATION:
Oligopoly is that form of market where there are few firms and there is natural interdependence among the firms regarding price and output policy.
This document provides an overview of imperfect competition, specifically monopolistic competition and oligopolies/duopolies. It begins with definitions and key characteristics of these market structures. Monopolistic competition is described as having many firms that produce differentiated products and face elastic demand curves. Firms engage in non-price competition through advertising and branding. The document uses hotels as an example. Oligopolies and duopolies are described as having only a few firms, where each firm's decisions significantly impact competitors. Game theory is used to demonstrate mutual dependence between firms. The tendency for collusion but its illegality is also discussed.
Externalities like pollution are costs not considered by buyers and sellers. This leads markets to produce inefficiently high pollution. Government intervention can correct market failures, but may also fail if it does not use incentive-based policies like effluent taxes and emissions trading rather than command-and-control regulations. The Coase Theorem finds private bargaining can achieve efficiency if property rights and low transaction costs allow negotiations, though obstacles often remain.
12 income distribution, poverty, and discriminationNepDevWiki
The chapter discusses income distribution and poverty in the United States. It introduces the Lorenz curve as a measure of income inequality, showing that inequality has changed little since 1929. The poverty line is defined as three times the cost of a minimal diet, and around 12-13% of Americans live below this level. Cash transfers like Social Security count towards the poverty line, while in-kind benefits like food stamps do not. Critics argue welfare reduces work incentives and administrative costs are high. Proposed reforms include a negative income tax and workfare programs. Discrimination and lack of equal pay can also impact individuals' wages.
$6
MFC
$4
$2
$1
Quantity of Labor
1 2 3 4 5
The document discusses labor markets and key concepts including:
- Marginal revenue product (MRP) determines a worker's contribution to total revenue.
- The demand curve for labor shows quantities firms will hire at different wage rates. MRP is the firm's labor demand curve.
- The supply curve of labor shows quantities workers will offer at different wage rates. The market supply is the sum of individual supply curves.
- A monopsonist faces the industry supply curve and pays the same wage, so its marginal factor cost (MFC) exceeds the supply curve
The marginal product of the third washing station is the change in total output from adding that station. With 2 stations they washed 100 cars. With 3 stations they washed 150 cars. So the change, or marginal product, of adding the third station is 150 - 100 = 50 cars per day.
The document summarizes key concepts from consumer choice theory in economics. It discusses the concepts of utility, total utility, marginal utility, diminishing marginal utility, and consumer equilibrium. It explains that consumer equilibrium occurs when the marginal utility per dollar is equal for all goods purchased. This can be used to derive the downward-sloping demand curve, as when price falls, consumption increases to restore equilibrium. The income and substitution effects are also summarized as complementary explanations for the law of demand. When price decreases, these effects work together to increase the quantity demanded.
05 price elasticity of demand and supplyNepDevWiki
Price elasticity of demand measures how responsive quantity demanded is to price changes. It is calculated as the percentage change in quantity divided by the percentage change in price. Elastic demand occurs when this is above 1, inelastic below 1, and unitary elastic at 1. Perfectly elastic demand is horizontal, while perfectly inelastic is vertical. Factors like substitutes, budget share, and adjustment time influence elasticity. Income elasticity measures responsiveness to income changes, while cross elasticity measures responsiveness between related goods. Price elasticity of supply measures responsiveness of quantity supplied to price. Tax incidence depends on demand elasticity, with inelastic demand leading to consumers paying more of the tax.
04a applying supply and demand analysis to health careNepDevWiki
This document discusses the application of supply and demand analysis to healthcare. It contains the following key points:
1) The demand curve for healthcare is downward sloping, as with other goods and services. The supply curve is upward sloping.
2) A copayment is the percentage of the cost of services that consumers pay out of pocket. Higher copayment rates decrease the quantity of healthcare demanded.
3) Shifts in the supply and demand curves for healthcare can be caused by changes in factors like the number of buyers/sellers, incomes, prices of substitutes, and resource prices.
4) An increase in demand leads to an increase in both equilibrium price and quantity, while a
The document provides an overview of key concepts related to supply and demand. It defines the law of demand as stating that there is an inverse relationship between price and quantity demanded, ceteris paribus. It also defines the law of supply as stating that there is a direct relationship between price and quantity supplied, ceteris paribus. The document explains that a change in price results in a movement along the demand or supply curve, while a change in a non-price determinant results in a shift of the entire curve. Market equilibrium exists where quantity demanded equals quantity supplied.
02 production possibilities and opportunity costNepDevWiki
The key concepts from Chapter 2 of the document include:
1) The three fundamental economic questions are what to produce, how to produce, and for whom to produce.
2) Opportunity cost is the best alternative forgone in making a decision and represents the value of the next best choice not selected.
3) A production possibilities curve illustrates the maximum combinations of two goods an economy can produce given scarce resources, and assumes resources and technology are fixed in the short-run.
4) Points inside the curve represent inefficient production, while points on the curve are efficient. The law of increasing opportunity costs and marginal analysis are important concepts relating to the production possibilities curve.
5) Economic growth occurs when
This document contains an appendix that discusses key economic graph concepts:
- It defines direct, inverse, and independent relationships between two variables using graphs with examples.
- It explains the concept of slope and how it can be positive, negative, or variable depending on the shape of the curve.
- It distinguishes between movement along a curve, which occurs when the price changes, versus a shift in the entire curve, which happens when a third variable changes.
The document concludes with an practice quiz that tests understanding of these concepts.
01 introducing the economic way of thinkingNepDevWiki
This chapter introduces key economic concepts such as scarcity, resources, and the difference between microeconomics and macroeconomics. It explains that scarcity exists because human wants are unlimited but resources are limited, forcing individuals and societies to make choices. Resources are categorized as land, labor, and capital. Entrepreneurs organize these resources to produce goods and services. Economics studies how people make choices to satisfy wants. Microeconomics examines individual decision-making units while macroeconomics looks at whole economies. Models are used to understand and predict economic behavior.
13 the phillips curve and expectations theoryNepDevWiki
This document provides an overview of the Phillips Curve and expectations theory. It discusses the short-run and long-run Phillips Curves, and how adaptive and rational expectations theories explain the natural rate model. Adaptive expectations theory suggests that expansionary policies are useless long-run to reduce unemployment, while rational expectations theory indicates policies can be negated by anticipated effects. The document also reviews incomes policies and how different macroeconomic models like monetarism, Keynesianism, supply-side economics and the new classical school approach curing inflation.
The document provides an overview of key concepts in monetary economics from different schools of thought. It discusses the Keynesian, classical, and monetarist views. Specifically, it explains the three motives for holding money according to Keynes as transactions, precautionary, and speculative demand. It also describes the demand for money curve and how the equilibrium interest rate is determined by the intersection of money demand and supply. Changes in the money supply can then affect aggregate demand, output, prices, and employment under different economic models.
80
The money multiplier is 1/required reserve ratio = 1/0.25 = 4
A $1,000 decrease in excess reserves by the Fed would cause a $4,000 decrease in the money supply based on the money multiplier formula. The answer is c.
The document provides an overview of key concepts related to money and the Federal Reserve System. It defines money as anything that serves as a medium of exchange, unit of account, and store of value. It also discusses the functions and properties of money, different types of money including commodity and fiat money, and definitions of the money supply including M1, M2, and M3. Additionally, the summary explains the role of the Federal Reserve System in controlling the money supply and supervising banks, as well as other organizations like the FDIC that insure bank deposits.
09 federal deficits and the national debtNepDevWiki
The national debt is the total amount owed by the federal government to holders of government securities. It has more than tripled since 1980 as a result of accumulating budget deficits. Approximately 17% of the debt is held by foreign entities, representing a burden as it transfers purchasing power overseas. Crowding out occurs when government borrowing to finance deficits causes interest rates to rise, reducing private sector consumption and investment.
This chapter examines decisions made by public sector entities like politicians, bureaucrats and voters. It discusses how government expenditures have grown as a percentage of GDP since the 1950s, primarily due to increased spending on transfer programs. Federal tax revenues, especially individual income and payroll taxes, are the primary source of funding. The US has a lighter tax burden compared to other advanced countries when measured as a percentage of GDP. The chapter also covers principles of taxation like benefits received and ability to pay. It analyzes factors that can lead to inefficient government outcomes under public choice theory.
The document discusses key concepts related to aggregate demand and supply. It explains that the aggregate demand curve shows the level of real GDP purchased in the economy at different price levels. It slopes downward due to the real balance effect, interest rate effect, and net exports effect. The aggregate supply curve shows the level of real GDP produced at different price levels. According to Keynes, a shift in aggregate demand can restore a depressed economy to full employment by increasing real GDP and employment.
The Keynesian model argues that the economy may require government intervention to achieve and maintain full employment. Keynes rejected the classical view that markets will automatically achieve full employment.
2. In this chapter, you will
learn to solve these
economic puzzles:
Why doesn’t the monopolist
AreHow can price in
medallion cabs
gouge consumers by
New York City
discriminationhighest
charging the be fair?
monopolists?
possible price?
2
3. What is a Monopoly?
• Single seller
• Unique product
• Impossible entry into
the market
3
4. What are the most
common Monopolies?
Local monopolies are more
common real-world
approximations of the
model than national or
world market monopolies
4
5. What does it mean to
have a Unique Product?
There are no close
substitutes for the
monopolists product
5
6. What are some examples
of Impossible Entry?
• Owner of a vital resource
• Legal barriers
• Economies of scale
6
7. What is a
Natural Monopoly?
An industry in which the
long-run average cost of
production declines
throughout the entire market
7
8. What is unique about a
Natural Monopoly?
A single firm will produce
output at a lower per-unit
cost than two or more
firms in the industry
8
9. What is a Price Maker?
A firm that faces a
downward-sloping
demand curve
9
10. What is the difference
between Monopoly and
Perfect Competition?
The D and MR curves of
the monopolist are
downward sloping; in
perfect competition
they are horizontal
10
11. What is unique about the
Demand Curve for a
Monopolist?
The monopolist demand
curve and the industry
demand curve are one
in the same
11
12. Minimizing Costs in a
40 Natural Monopoly
Cost per Unit (dollars)
35
30
25 5 firms
20
15 2 firms
10 1 firm
5 Quantity of Output
20 40 60 80 100
12
14. Why is MR < P for all but
the first unit of output?
To sell additional units, the
price has to be lowered;
this price-cut applies to all
units, not just the last unit
14
15. $100
$75
Monopoly
Dem
Price & Marginal Revenue
$50 and
$25 Ma
0
rgin
$-25
al R
$-50
$-75
eve
nue
$-100
2 4 6 8 10 12 14 16 18 Q
15
17. Where does a Monopolist
produce to maximize
profit or minimize losses?
MR = MC
17
18. P
$200 MR=MC
$175 MC
$150
$125
$100 ATC
$75 Profit
$50 AVC
$25
MR D
1 2 3 4 5 6 7 8 9
18
Q
19. P
$200 MC ATC
$175
$150
MR=MC
$125 Loss
$100
$75
$50 AVC
$25
MR D
1 2 3 4 5 6 7 8 9
19
Q
20. Can a Monopolist make a
profit in the long-run?
If the positions of a
monopolist’s demand and
cost curves give it a profit
and nothing disturbs these
curves, it can make a
profit in the long-run
20
21. What is
Price Discrimination?
The practice of a seller
charging different prices
for the same product not
justified by cost differences
21
22. What is
Arbitrage?
The practice of earning a
profit by buying a good at a
low price and reselling the
good at a higher price
22
30. How does Monopoly
harm Consumers?
It charges a higher price
and produces a lower
quantity than would be
the case in a perfectly
competitive situation
30
31. P Impact of Monopolizing
and Industry
MR=MC
∑MC
Pm
Pc
MR D
Qm Qc Q
31
32. What is the case
against Monopoly?
• Higher price
• Charges a Price > MC
• Long-run economic profit
• Alters the distribution of
income to favor monopolist
32
34. Key Concepts
• What is a Monopoly?
• What is a Natural Monopoly?
• What is unique about a Natural Monopoly?
• What is a Price Maker?
• What is the difference between Monopoly and P
• Why is MR < P for all but the first unit of outp
34
35. Key Concepts cont.
• Where does a Monopolist produce to maximize
• Can a Monopolist make a profit in the long-ru
• What is Price Discrimination?
• How does Monopoly harm Consumers?
35
37. Monopoly is a single seller
facing the entire industry demand
curve because it is the industry. The
monopolist sells a unique product,
and extremely high barriers to entry
protect it from competition.
37
38. Barriers to entry that prevent
new firms from entering an industry
are (1) ownership of an essential
resource, (2) legal barriers, and (3)
economies of scale. Government
franchises, licenses, patents, and
copyrights are the most obvious legal
barriers to entry.
38
39. A natural monopoly arises because
of of economies of scale in which the
LRAC curve falls as production
increases. Without government
restrictions, economies of scale allow a
single firm to produce at a lower cost
than any firm producing a smaller
output. Thus, smaller firms leave the
industry, new firms fear competing
with the monopolist, and the result is
that a monopoly emerges naturally.
39
40. Minimizing Costs in a
40 Natural Monopoly
Cost per Unit (dollars)
35
30
25 5 firms
20
15 2 firms
10 1 firm
5 Quantity of Output
20 40 60 80 100
40
41. A price-maker firm faces a
downward-sloping demand curve. It
therefore searches its demand curve
to find the price-output combination
that maximizes its profit and
minimizes its loss.
41
42. The marginal revenue and the
demand curves are downward-
sloping for a monopolist. The
marginal revenue curve for a
monopolist is below the demand
curve, the total revenue curve
reaches its maximum where
marginal revenue equals zero.
42
43. Price elasticity of demand
corresponds to sections of the
marginal revenue curve. When MR
is positive, price elasticity of
demand is elastic, Ed > 1. When MR
is equal to zero, price elasticity of
demand is unit elastic, = 1. When
MR is negative, price elasticity of
demand is inelastic, Ed < 1.
43
44. The short-run-profit-maximizing
monopolist, like the perfectly
competitive firm, locates the profit-
maximizing price by producing the
output where the MR and the MAC
curves intersect. If this is less than the
AVC curve, the monopolist shuts
down to minimize losses.
44
45. P
$200 MR=MC
$175 MC
$150
$125
$100 ATC
$75 Profit
$50 AVC
$25
MR D
1 2 3 4 5 6 7 8 9
45
Q
46. P
$200 MC ATC
$175
$150
MR=MC
$125 Loss
$100
$75
$50 AVC
$25
MR D
1 2 3 4 5 6 7 8 9
46
Q
47. The long-run-profit-maximizing
monopolist earns a profit because of
barriers to entry. If demand and cost
conditions prevent the monopolist from
earning a profit, it will leave the
industry.
47
48. Price discrimination allows the
monopolist to increase profits by
charging buyers different prices,
rather than a single price.
48
49. Three conditions are necessary
for price discrimination: (1) the
demand curve must be downward-
sloping, (2) buyers in different
markets must have different price
elasticities of demand, and (3) buyers
must be prevented from reselling the
product at a higher price than the
purchase price.
49
50. P Price Discrimination
Market for average students
MR=MC
T1
MC
MR D
Q1 Q
50
51. P Monopolist
Price Discrimination
Market for superior students
MR=MC
T2 MC
MR D
Q2 Q
51
52. Monopoly disadvantages are these:
(1) A monopolist charges a higher
price and produces less output than a
perfectly competitive firm, (2) resource
allocation is inefficient because the
monopolist produces less than if
competition existed, (3) monopoly
produces higher long-run profits than if
competition existed, and (4) monopoly
transfers income from consumers to
producers to a greater degree than
under perfect competition.
52
53. P Perfect Competition
MR=MC MC
MR, D
Pc
Qc
Q
53
56. 1. A monopolist always faces a demand curve
that is
a. perfectly inelastic.
b. perfectly elastic.
c. unit elastic.
d. the same as the market demand curve.
D. A monopoly is the only seller, so there is no
distinction between the market demand
curve and the individual demand curve.
56
57. 2. A monopoly sets the
a. price at which marginal revenue equals
zero.
b. price that maximizes total revenue.
c. highest possible price on its demand curve.
d. price at which marginal revenue equals
marginal cost.
D. Profits are always maximized if the firm
produces at the point where MR = MC.
57
58. P
$80 MR=MC
$70 MC
$60
$50
$40 ATC
$30 Profit
$20 AVC
$10
MR D
1 2 3 4 5 6 7 8 9
58
Q
59. 3. A monopolist sets
a. the highest possible price.
b. a price corresponding to the minimum
average total cost.
c. a price equal to marginal revenue.
d. a price determined by the point on the
demand curve corresponding to the level
of output at which marginal revenue
equals marginal cost.
e. none of the above.
D. Demand determines price in all market
forms.
59
60. 4. Which of the following is true for the
monopolist?
a. Economic profit is possible in the long-
run.
b. Marginal Revenue is less than the price
charged.
c. Profit maximizing or loss minimizing
occurs when marginal revenue equals
marginal cost.
D.d.All of the above are characteristics of
All of the above are true.
a monopoly.
60
61. P$40 Exhibit 8
MC
$30
$20
ATC
AVC
$10
D
100
MR
200 300 400 Q
61
62. 5. As shown in Exhibit 8, the profit-
maximizing or loss-minimizing output
for this monopolist is
a. 100 units a day.
b. 200 units a day.
c. 300 units a day.
d. 400 units a day.
B. 200 units is the point at which MR = MC.
62
63. 6. As shown in Exhibit 8, this monopolist
a. should shut down in the short-run.
b. should shut down in the long-run.
c. earns zero economic profit.
d. earns positive economic profit.
D. At the point where MR = MC (on the
vertical line), P is greater than ATC;
therefore, total revenue is greater than total
cost and an economic profit is being made.
63
64. 7. To maximize profit or minimize loss, the
monopolist in Exhibit 8 should set its price at
a. $30 per unit.
b. $25 per unit.
c. $20 per unit..
d. $10 per unit.
e. $40 per unit.
B. Maximum profit or minimized losses
are found by drawing a vertical line
where MR = MC. This line intersects the
demand curve at $25.
64
65. 8. If the monopolist in Exhibit 8 operates at
the profit-maximizing output, it will earn
total revenue to pay about what portion
of its total fixed cost?
a. None.
b. One-half.
c. Two-thirds.
d. All total fixed costs.
D. Since the monopolist is making a
profit, it can pay all of its fixed costs.
65
66. 9. For a monopolist to practice effective price
discrimination, one necessary condition is
a. identical demand curves among groups of
buyers.
b. differences in the price elasticity of demand
among groups of buyers.
c. a homogeneous product.
d. none of the above.
B. Price discrimination takes place when a
monopolist is faced with buyers that are
widely different; therefore, the buyers
elasticity of demand for the product will
be different.
66
67. 10. What is the act of buying a commodity at a
lower price and selling it at a higher price?
a. Buying short.
b. Discounting.
c. Tariffing.
d. Arbitrage.
D. The practice of earning a profit by
buying a good at a low price and reselling
the good at a higher price
67
68. 11. Under both perfect competition and
monopoly, a firm
a. is a price taker.
b. is a price maker.
c. will shut down in the short run if price falls
short of average total cost.
d. always earns a pure economic profit.
e. sets marginal cost equal to marginal
revenue.
E. The profit maximizing output for any
firm is where MR = MC.
68
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69