Microsoft is an example of a monopoly in the personal computer software market. As a monopoly, it has market power and can engage in price discrimination by charging different prices to different customers for the same good, even if costs are the same. Price discrimination allows monopolies to maximize profits by charging prices closer to each customer's willingness to pay. Governments can respond to monopolies in four ways: making industries more competitive, regulating monopolies' behavior, public ownership of monopolies, or doing nothing and letting monopolies self-regulate.
This document is a cartoon that uses interviews to explain the concept of price discrimination by a monopoly. It features Bill Gates explaining that as a monopolist, Microsoft can engage in price discrimination by charging different prices to different customers even if its costs are the same. The cartoon then provides examples of how businesses can segment customers and charge varying prices based on willingness to pay. It concludes by discussing government policies for addressing monopolies, including promoting competition, regulating prices, public ownership, and taking no action.
This document discusses key concepts related to monopoly markets including barriers to entry, price discrimination, marginal revenue, and inefficiencies that arise from monopolies compared to competitive markets. It provides examples of legal barriers like patents and copyrights that can create monopolies. It also discusses natural barriers for monopolies that arise due to economies of scale. The document compares pricing and output between perfect competition and monopoly markets.
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.
This document discusses the concept of oligopoly, which refers to a market structure with a small number of firms producing similar or identical products. The key feature of oligopoly is the tension between cooperation and self-interest among firms. While cooperating to act as a monopolist would be most profitable, firms have an incentive to compete by increasing their own production. As a result, oligopolies typically produce more and charge lower prices than a monopoly, but less and higher than a competitive market. Game theory, such as the prisoner's dilemma, demonstrates why cooperation is difficult to maintain in oligopolies.
The social costs of monopoly and regulationAkash Shrestha
The traditional analysis of the costs of monopoly concentrates on the deadweight loss involved, monopoly rents being considered merely a transfer to the monopolist from the consumer surplus that would exist under competition. Some years ago, that analysis was challenged by Posner (1975), who presented an ingenious argument that monopoly rents in fact measure the resources lost to society through rent seeking activities and thus should be counted in the costs of monopoly. That argument has recently been used by staff members of the Federal Trade Commission (Long et al. 1982, chap. 3, esp. pp. 77, 97, 104; see also Tollison, Higgins, and Shugart 1983, pp. 23-44) in an attempt to estimate the benefits potentially flowing from the use of the FTC's line-of-business program in antitrust enforcement.
This document summarizes key concepts around market power and policy approaches. It discusses how price discrimination by monopolies increases output and profits compared to single-price monopolies. It also describes oligopolies and monopolistic competition as markets with some but not complete power, influenced by product differentiation and number of firms. The document outlines government policies for regulating natural monopolies, including state ownership, cost-plus regulation, and allowing private competition through bidding. It raises issues around determining costs and incentives under different regulatory models.
This document summarizes key aspects of oligopolies and public policy approaches. It describes how oligopolies are characterized by few dominant sellers offering similar products, which leads to interdependent and strategic decision-making. It provides examples of oligopolies like mobile networks and cement companies. It then discusses duopolies and how public policy views oligopolies as restricting trade and leading to lower output and higher prices. The main public policy approaches to oligopolies are the do-nothing view, antitrust view, and regulation view.
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 is a cartoon that uses interviews to explain the concept of price discrimination by a monopoly. It features Bill Gates explaining that as a monopolist, Microsoft can engage in price discrimination by charging different prices to different customers even if its costs are the same. The cartoon then provides examples of how businesses can segment customers and charge varying prices based on willingness to pay. It concludes by discussing government policies for addressing monopolies, including promoting competition, regulating prices, public ownership, and taking no action.
This document discusses key concepts related to monopoly markets including barriers to entry, price discrimination, marginal revenue, and inefficiencies that arise from monopolies compared to competitive markets. It provides examples of legal barriers like patents and copyrights that can create monopolies. It also discusses natural barriers for monopolies that arise due to economies of scale. The document compares pricing and output between perfect competition and monopoly markets.
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.
This document discusses the concept of oligopoly, which refers to a market structure with a small number of firms producing similar or identical products. The key feature of oligopoly is the tension between cooperation and self-interest among firms. While cooperating to act as a monopolist would be most profitable, firms have an incentive to compete by increasing their own production. As a result, oligopolies typically produce more and charge lower prices than a monopoly, but less and higher than a competitive market. Game theory, such as the prisoner's dilemma, demonstrates why cooperation is difficult to maintain in oligopolies.
The social costs of monopoly and regulationAkash Shrestha
The traditional analysis of the costs of monopoly concentrates on the deadweight loss involved, monopoly rents being considered merely a transfer to the monopolist from the consumer surplus that would exist under competition. Some years ago, that analysis was challenged by Posner (1975), who presented an ingenious argument that monopoly rents in fact measure the resources lost to society through rent seeking activities and thus should be counted in the costs of monopoly. That argument has recently been used by staff members of the Federal Trade Commission (Long et al. 1982, chap. 3, esp. pp. 77, 97, 104; see also Tollison, Higgins, and Shugart 1983, pp. 23-44) in an attempt to estimate the benefits potentially flowing from the use of the FTC's line-of-business program in antitrust enforcement.
This document summarizes key concepts around market power and policy approaches. It discusses how price discrimination by monopolies increases output and profits compared to single-price monopolies. It also describes oligopolies and monopolistic competition as markets with some but not complete power, influenced by product differentiation and number of firms. The document outlines government policies for regulating natural monopolies, including state ownership, cost-plus regulation, and allowing private competition through bidding. It raises issues around determining costs and incentives under different regulatory models.
This document summarizes key aspects of oligopolies and public policy approaches. It describes how oligopolies are characterized by few dominant sellers offering similar products, which leads to interdependent and strategic decision-making. It provides examples of oligopolies like mobile networks and cement companies. It then discusses duopolies and how public policy views oligopolies as restricting trade and leading to lower output and higher prices. The main public policy approaches to oligopolies are the do-nothing view, antitrust view, and regulation view.
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 defines and describes different types of monopolies. It explains that a monopoly is a market with a single seller and no close substitutes. It then outlines 10 types of monopolies: perfect, imperfect, private, public, simple, discriminating, legal, natural, technological, and joint monopolies. Each type is defined, and examples are provided to illustrate the key features of different monopoly structures.
Oligopolies are markets with a small number of interdependent firms. There is no single model of oligopoly behavior. Models include the cartel model, where firms collude to act as a monopoly, and the contestable market model, where easy entry leads to competitive pricing. Game theory uses strategic decision making to analyze how firms in an oligopoly consider rivals' responses. The prisoner's dilemma demonstrates how cooperation can be difficult to achieve. Implicit collusion through price leadership or sticky prices also influences oligopoly behavior.
The document discusses concepts related to microeconomics and resource allocation. It covers several methods of allocation including command, majority rule, contest, first come first served, and lottery. It then discusses key microeconomic concepts like demand, supply, consumer surplus, producer surplus, and market equilibrium. It also addresses market failures that can lead to underproduction or overproduction like price regulations, taxes/subsidies, externalities, public goods, monopoly, and high transaction costs. Finally, it discusses fairness in markets and different approaches to achieving both efficiency and equity.
Describe the alternative methods of allocating scarce resources
Explain the connection between demand and marginal benefit and define consumer surplus; and explain the connection between supply and marginal cost and define producer surplus
Explain the conditions under which markets are efficient and inefficient
Explain the main ideas about fairness and evaluate claims that markets result in unfair outcomes
This document discusses oligopolies, which are markets with only a few sellers. Key points include:
- Oligopolies fall between perfect competition and monopoly in terms of market structure.
- Firms in an oligopoly must consider how their rivals will respond to their pricing and output decisions, making strategic interactions important.
- Oligopolies may cooperate like a monopoly to restrict output and raise prices, but self-interest often prevents long-term cooperation.
- Antitrust laws aim to prevent anticompetitive behavior and encourage more competitive outcomes with greater output and lower prices.
A monopoly exists when a single supplier dominates the market for a good or service. This gives the supplier power over prices and reduces competition compared to other market structures like perfect competition. Key aspects of a monopoly include barriers to entry that prevent competition, a single seller, and the ability to set prices above costs. Monopolies are often regulated by governments to prevent excess profits and promote fair prices and quality services.
This document provides an overview of duopoly, which is defined as a market situation where two companies control nearly all of the market for a given product or service. Key points made include:
- A duopoly has two firms that have strong price control and create barriers to entry for new competitors.
- Advantages can include close competition between the two firms, but disadvantages include the difficulty of new firms entering the market and a potential lack of innovation.
- Examples given of duopolies include Boeing and Airbus in passenger airplanes, and Amazon and Apple in e-books.
There are a few key characteristics of oligopolies:
- They have a small number of firms that are mutually interdependent. Each firm must consider the reactions of other firms when making decisions.
- Firms may engage in implicit or explicit collusion to set prices. A price leadership cartel may form where firms follow the lead of the dominant firm.
- Cartels and collusion aim to restrict output and maintain high prices, but they are illegal in the US. Facilitating practices can still enable tacit cooperation.
- An imperfectly competitive industry is one where single firms have some control over the price of their output through market power. Market power is a firm's ability to raise prices without losing all demand.
- A pure monopoly is a single firm industry where there are no close substitutes for the product and significant barriers prevent other firms from entering to compete for profits. Barriers to entry include government franchises, patents, large economies of scale, and ownership of scarce resources.
- A profit-maximizing monopolist will produce at the quantity where marginal revenue equals marginal cost to maximize profits. The monopolist restricts output and charges higher prices than under perfect competition, leading to inefficiencies.
- Monopolies have market power that allows them to raise prices without losing all demand for their products. Barriers to entry like large capital requirements, patents, and government franchises can prevent competition in imperfectly competitive industries.
- A pure monopoly is a single firm that produces a unique product and faces no competition due to barriers that prevent other firms from entering the market. As the sole producer, the monopoly is the entire industry.
- Monopolies restrict output and charge higher prices than competitive firms, leading to inefficient resource allocation and welfare losses for society. Antitrust policy aims to promote competition and limit monopolies through legislation like the Sherman Act.
This document provides an overview of oligopoly and strategic behavior. It discusses key concepts such as cartel pricing, the duopolists' dilemma, and how firms can overcome the dilemma through mechanisms like low-price guarantees. It also examines simultaneous decision making using game theory tools like the prisoners' dilemma and payoff matrices. Firms in an oligopoly must consider strategic entry deterrence through limit pricing to protect their market power from potential competitors. Examples are provided of industries where these oligopoly concepts apply.
The document discusses oligopolies, which are market structures with only a few firms. It notes that oligopolies exist between perfect competition and pure monopoly. Oligopolies are characterized by interdependent firms that would benefit from cooperation to behave like a monopolist, but finding and maintaining cooperation can be difficult due to tensions between self-interest and joint interests. The document uses examples like duopolies, cartels, and game theory models to illustrate challenges around cooperation in oligopolistic markets.
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.
This document discusses various concepts related to corporate social responsibility towards competition, including unfair competition, antitrust laws, cartels, intellectual property rights, and determining a just price. It provides examples of unfair trade practices like price fixing between competitors and abusing market dominance. The document also discusses anti-trust laws and how they prohibit practices like price fixing, abuses of market power, and agreements between competitors to restrict output.
The document is a report on monopoly that was submitted by two MBA students, Jaymin Patel and Jaimin Upadhyay, to the J.K. Patel Institute of Management. It contains sections on the meaning and features of monopoly, why monopolies arise, types of monopoly, why monopolies can be harmful, arguments for tolerating monopolies, optimal public policy, and two case studies on monopolies in different industries.
This document discusses oligopoly and duopoly market structures. It defines oligopoly as a market with few firms where there is natural interdependence between firms regarding price and output. Duopoly is defined as a market with two firms producing the same or similar goods. Both oligopoly and duopoly are characterized by high barriers to entry, mutual interdependence between firms, and the ability for firms to engage in collusive behavior. Examples of oligopolies include steel and cell phones. Examples of duopolies include Pepsi and Coke in soft drinks and Airbus and Boeing in commercial aircraft.
Monopoly Market Structure Example of Wapda, PtclArslan Khalid
Presentation on monopoly market structure by taking the example of wapda and ptcl?
Why other firms cannot enter into it?
What are the problem faced by Monopoly Market?
Monopolistic competition and oligopoly are two market structures between perfect competition and monopoly. Monopolistic competition is characterized by many firms with differentiated products, easy entry and exit, and firms making positive profits in the short run but zero in the long run. Oligopoly is characterized by a small number of interdependent firms where the actions of one firm impact others and strategic behavior can result in inefficient outcomes.
Monopolistic competition is characterized by many small firms producing differentiated products, free entry and exit into the industry, and firms having some degree of market power. Oligopoly is characterized by a small number of large, dominant firms producing either homogeneous or differentiated products. In oligopoly, the behavior of any single firm depends greatly on the actions of other firms in the industry.
- Imperfect competition refers to market structures between perfect competition and pure monopoly, including oligopoly and monopolistic competition.
- Oligopoly is characterized by a few sellers offering similar products, with firms monitoring each other's actions. Monopolistic competition has many firms selling differentiated products.
- In oligopoly, firms would benefit most by cooperating like a monopoly but competition makes this difficult to sustain, resulting in an equilibrium with higher output and price than a monopoly.
DeBeers Diamond Company is a classic example of monopoly. It controls 80% of the world's diamond production and has substantial influence over diamond prices. DeBeers maintains its monopoly power through heavy advertising that positions diamonds as unique and differentiated from other gems in consumers' minds. While monopolies are typically undesirable due to high prices and low output, DeBeers' monopoly allows it to earn substantial profits from the global diamond market.
This document discusses different market structures: perfect competition, monopoly, monopolistic competition, and oligopoly. It provides details on the key features of each structure, including how pricing is determined. For perfect competition, the market price is determined by supply and demand. A monopoly is characterized by a single seller. Monopolistic competition involves differentiated products and imperfect competition. Oligopoly is dominated by a small number of large sellers, with features like product branding and interdependent decision-making. Examples are provided for each market structure type.
This document defines and describes different types of monopolies. It explains that a monopoly is a market with a single seller and no close substitutes. It then outlines 10 types of monopolies: perfect, imperfect, private, public, simple, discriminating, legal, natural, technological, and joint monopolies. Each type is defined, and examples are provided to illustrate the key features of different monopoly structures.
Oligopolies are markets with a small number of interdependent firms. There is no single model of oligopoly behavior. Models include the cartel model, where firms collude to act as a monopoly, and the contestable market model, where easy entry leads to competitive pricing. Game theory uses strategic decision making to analyze how firms in an oligopoly consider rivals' responses. The prisoner's dilemma demonstrates how cooperation can be difficult to achieve. Implicit collusion through price leadership or sticky prices also influences oligopoly behavior.
The document discusses concepts related to microeconomics and resource allocation. It covers several methods of allocation including command, majority rule, contest, first come first served, and lottery. It then discusses key microeconomic concepts like demand, supply, consumer surplus, producer surplus, and market equilibrium. It also addresses market failures that can lead to underproduction or overproduction like price regulations, taxes/subsidies, externalities, public goods, monopoly, and high transaction costs. Finally, it discusses fairness in markets and different approaches to achieving both efficiency and equity.
Describe the alternative methods of allocating scarce resources
Explain the connection between demand and marginal benefit and define consumer surplus; and explain the connection between supply and marginal cost and define producer surplus
Explain the conditions under which markets are efficient and inefficient
Explain the main ideas about fairness and evaluate claims that markets result in unfair outcomes
This document discusses oligopolies, which are markets with only a few sellers. Key points include:
- Oligopolies fall between perfect competition and monopoly in terms of market structure.
- Firms in an oligopoly must consider how their rivals will respond to their pricing and output decisions, making strategic interactions important.
- Oligopolies may cooperate like a monopoly to restrict output and raise prices, but self-interest often prevents long-term cooperation.
- Antitrust laws aim to prevent anticompetitive behavior and encourage more competitive outcomes with greater output and lower prices.
A monopoly exists when a single supplier dominates the market for a good or service. This gives the supplier power over prices and reduces competition compared to other market structures like perfect competition. Key aspects of a monopoly include barriers to entry that prevent competition, a single seller, and the ability to set prices above costs. Monopolies are often regulated by governments to prevent excess profits and promote fair prices and quality services.
This document provides an overview of duopoly, which is defined as a market situation where two companies control nearly all of the market for a given product or service. Key points made include:
- A duopoly has two firms that have strong price control and create barriers to entry for new competitors.
- Advantages can include close competition between the two firms, but disadvantages include the difficulty of new firms entering the market and a potential lack of innovation.
- Examples given of duopolies include Boeing and Airbus in passenger airplanes, and Amazon and Apple in e-books.
There are a few key characteristics of oligopolies:
- They have a small number of firms that are mutually interdependent. Each firm must consider the reactions of other firms when making decisions.
- Firms may engage in implicit or explicit collusion to set prices. A price leadership cartel may form where firms follow the lead of the dominant firm.
- Cartels and collusion aim to restrict output and maintain high prices, but they are illegal in the US. Facilitating practices can still enable tacit cooperation.
- An imperfectly competitive industry is one where single firms have some control over the price of their output through market power. Market power is a firm's ability to raise prices without losing all demand.
- A pure monopoly is a single firm industry where there are no close substitutes for the product and significant barriers prevent other firms from entering to compete for profits. Barriers to entry include government franchises, patents, large economies of scale, and ownership of scarce resources.
- A profit-maximizing monopolist will produce at the quantity where marginal revenue equals marginal cost to maximize profits. The monopolist restricts output and charges higher prices than under perfect competition, leading to inefficiencies.
- Monopolies have market power that allows them to raise prices without losing all demand for their products. Barriers to entry like large capital requirements, patents, and government franchises can prevent competition in imperfectly competitive industries.
- A pure monopoly is a single firm that produces a unique product and faces no competition due to barriers that prevent other firms from entering the market. As the sole producer, the monopoly is the entire industry.
- Monopolies restrict output and charge higher prices than competitive firms, leading to inefficient resource allocation and welfare losses for society. Antitrust policy aims to promote competition and limit monopolies through legislation like the Sherman Act.
This document provides an overview of oligopoly and strategic behavior. It discusses key concepts such as cartel pricing, the duopolists' dilemma, and how firms can overcome the dilemma through mechanisms like low-price guarantees. It also examines simultaneous decision making using game theory tools like the prisoners' dilemma and payoff matrices. Firms in an oligopoly must consider strategic entry deterrence through limit pricing to protect their market power from potential competitors. Examples are provided of industries where these oligopoly concepts apply.
The document discusses oligopolies, which are market structures with only a few firms. It notes that oligopolies exist between perfect competition and pure monopoly. Oligopolies are characterized by interdependent firms that would benefit from cooperation to behave like a monopolist, but finding and maintaining cooperation can be difficult due to tensions between self-interest and joint interests. The document uses examples like duopolies, cartels, and game theory models to illustrate challenges around cooperation in oligopolistic markets.
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.
This document discusses various concepts related to corporate social responsibility towards competition, including unfair competition, antitrust laws, cartels, intellectual property rights, and determining a just price. It provides examples of unfair trade practices like price fixing between competitors and abusing market dominance. The document also discusses anti-trust laws and how they prohibit practices like price fixing, abuses of market power, and agreements between competitors to restrict output.
The document is a report on monopoly that was submitted by two MBA students, Jaymin Patel and Jaimin Upadhyay, to the J.K. Patel Institute of Management. It contains sections on the meaning and features of monopoly, why monopolies arise, types of monopoly, why monopolies can be harmful, arguments for tolerating monopolies, optimal public policy, and two case studies on monopolies in different industries.
This document discusses oligopoly and duopoly market structures. It defines oligopoly as a market with few firms where there is natural interdependence between firms regarding price and output. Duopoly is defined as a market with two firms producing the same or similar goods. Both oligopoly and duopoly are characterized by high barriers to entry, mutual interdependence between firms, and the ability for firms to engage in collusive behavior. Examples of oligopolies include steel and cell phones. Examples of duopolies include Pepsi and Coke in soft drinks and Airbus and Boeing in commercial aircraft.
Monopoly Market Structure Example of Wapda, PtclArslan Khalid
Presentation on monopoly market structure by taking the example of wapda and ptcl?
Why other firms cannot enter into it?
What are the problem faced by Monopoly Market?
Monopolistic competition and oligopoly are two market structures between perfect competition and monopoly. Monopolistic competition is characterized by many firms with differentiated products, easy entry and exit, and firms making positive profits in the short run but zero in the long run. Oligopoly is characterized by a small number of interdependent firms where the actions of one firm impact others and strategic behavior can result in inefficient outcomes.
Monopolistic competition is characterized by many small firms producing differentiated products, free entry and exit into the industry, and firms having some degree of market power. Oligopoly is characterized by a small number of large, dominant firms producing either homogeneous or differentiated products. In oligopoly, the behavior of any single firm depends greatly on the actions of other firms in the industry.
- Imperfect competition refers to market structures between perfect competition and pure monopoly, including oligopoly and monopolistic competition.
- Oligopoly is characterized by a few sellers offering similar products, with firms monitoring each other's actions. Monopolistic competition has many firms selling differentiated products.
- In oligopoly, firms would benefit most by cooperating like a monopoly but competition makes this difficult to sustain, resulting in an equilibrium with higher output and price than a monopoly.
DeBeers Diamond Company is a classic example of monopoly. It controls 80% of the world's diamond production and has substantial influence over diamond prices. DeBeers maintains its monopoly power through heavy advertising that positions diamonds as unique and differentiated from other gems in consumers' minds. While monopolies are typically undesirable due to high prices and low output, DeBeers' monopoly allows it to earn substantial profits from the global diamond market.
This document discusses different market structures: perfect competition, monopoly, monopolistic competition, and oligopoly. It provides details on the key features of each structure, including how pricing is determined. For perfect competition, the market price is determined by supply and demand. A monopoly is characterized by a single seller. Monopolistic competition involves differentiated products and imperfect competition. Oligopoly is dominated by a small number of large sellers, with features like product branding and interdependent decision-making. Examples are provided for each market structure type.
The document discusses the conditions of perfect competition in markets. It explains that perfect competition requires: many small businesses with similar products; low barriers to entry and exit; perfect information; and buyers and sellers that are price takers. However, most industries exhibit imperfect competition instead, with market structures like monopoly, oligopoly, and monopolistic competition that have some control over prices. The benefits of perfect competition are economic efficiency and prices that benefit both consumers and businesses.
The document discusses perfect competition and its five conditions: many buyers and sellers, similar products, easy market entry and exit, perfect information, and price-taking behavior. It provides examples of industries that approach perfect competition like agriculture. Perfect competition maximizes economic efficiency but is rare to achieve. Most industries exhibit imperfect competition characterized by monopoly, oligopoly, or monopolistic competition.
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
Please reword these paragraphs in your own words. DO NOT copy from.docxLeilaniPoolsy
Please reword these paragraphs in your own words. DO NOT copy from any websites or use the same words as in the paragraphs below.
1-It states that as managers try to keep costs low, it may not always be the business expenses that are on their mind, but the part of them that go into their pockets. A manager of a company will try to maximize profits in homes it can help him on his way to maximizing his income as well. I have seen with my own eyes, companies that do not want to pay people what they are worth, including their managers. I worked at a factory for about 3 years that had an insanely high rate of turn over. In the end, it ended up costing the company more to have the people trained for a week or two and then have them leave than it would of just to raise the pay a little bit. People would think the pay was okay until they got into work and started training and seeing how hard the job was and how much was expected out of the employees for just about a dollar over minimum wage. If you didn't produce enough parts for the day they would then drop your pay by $0.50 an hour. It has been two and a half years since I have worked there and everyone that I worked with has also moved on to different jobs. The company is barely staying afloat because of not being able to keep employees there.
· 2-According to Colander (2013) "Monopoly is a market structure in which one firm makes up the entire market." Meaning that there is no competition so a firm has the flexibility to charge whatever price they want and produce inferior products. As for monopolistic and perfect competition, is the opposite? Meaning that there is a lot of competition, so firms are limited to how much they can price their goods or services. Now, the more difficult part is describing the difference from monopolistic competition to perfect competition. According to the reading material, the main difference is that in monopolistic competition there is the consideration of limiting the amount of production due to lowering the market price of their product. Besides thinking of rarity, a good example would refrigerators. Usually everyone needs a refrigerator; however there really is no point of having more than one or two refrigerator per household. If I produce so many, I would have no one to sell the product to. As for perfect competition assumes that every sale equals a profit.
· 3-Oligopolistic have a strategy plan on how much they will price their products or services according to their competitors. The Cartel Model is a number of firms acting as one. They as a team dominate the industry and limit outside entry. Each of the firms involved within the firms follow a uniform pricing policy that is beneficial for everyone. Implicit price collision is when everyone charges the same price. For example when there are vendors outside selling the same merchandise, the prices will usually be the same to avoid competition. According to the reading Economics, Ch. 15: Oligop.
The document discusses different market structures including perfect competition, monopolistic competition, oligopoly, and monopoly. It provides details on the key characteristics of each structure such as the number of firms, level of control over prices, and examples. Perfect competition has many small firms, undifferentiated products, no control over prices or barriers to entry. Monopolistic competition has many firms but differentiated products giving some control over prices. Oligopoly has a few dominant firms that can influence prices through collusion. Monopoly has a single firm with complete control over prices.
1. The document discusses different types of market structures in economics including exchange economy, monopoly, oligopoly, and monopolistic competition.
2. An exchange economy refers to an interaction between agents who can exchange products based on a price system. There are two types - pure exchange economy and exchange economy with production.
3. A monopoly is dominated by one firm/entity and has no competition, which can lead to high costs for consumers. Oligopoly has a small number of firms that generate the supply and are interdependent on each other's actions. Monopolistic competition combines elements of monopoly and competition through product differentiation.
Based on the information provided:
- The demand function is in log-linear form, with the coefficients representing the elasticities.
- The price elasticity of demand (PED) is given as -1.5. This means demand is price elastic (PED > 1 in absolute value).
- The income elasticity of demand (YED) is given as 1.3. This means demand is income elastic (YED > 1).
So in summary, the key aspects of the demand for Nike sportswear based on the given expression are:
1) Demand is price elastic
2) Demand is income elastic
3) The function allows us to estimate how quantity demanded responds to changes in price and
1) Monopolistic competition is an imperfect market structure between perfect competition and monopoly. It is characterized by many small businesses that sell differentiated products that are close substitutes for one another.
2) Firms have some control over prices under monopolistic competition. While there are many buyers and sellers, product differentiation gives firms some monopoly power over their brand.
3) In both the short run and long run, a monopolistically competitive firm will be in equilibrium when marginal revenue equals marginal cost, allowing the firm to maximize its profits. In the short run, firms can earn supernormal profits if price is above average cost.
The document discusses monopoly market structures. It defines a monopoly as a market with a single seller of a product without close substitutes. It notes that monopolies can arise through government protections, control of critical resources, or large capital requirements. The document then examines the characteristics of monopolies, including price setting behavior to maximize profits where marginal revenue equals marginal cost. It also explores various types of price discrimination strategies monopolies may use.
While monopolies can generate economies of scale that lower prices for consumers, they may lack incentives for technological progress unless facing competitive pressures. Price discrimination allows monopolies to charge different prices to different customer groups, increasing profits but seen as an unfair practice that harms society. Natural monopolies in utilities are regulated by governments to set prices based on costs plus a fair rate of return. In some cases, regulated utilities are subsidized to operate at a loss to ensure output.
There are several methods that oligopolistic firms use to set prices. Cost-based pricing sets price based on average costs, with some markup added. Competition-based pricing matches prices of similar products already on the market. Demand-based pricing considers how demand responds to price changes, allowing for perceived-value pricing and price discrimination between market segments. Strategy-based pricing for new products involves either price skimming to extract high prices from early adopters or penetration pricing at low initial prices to gain market share. Firms typically combine multiple pricing methods rather than relying on just one.
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.
Monopolies exist because they allow firms to survive in capitalism by controlling costs through economies of scale, locations, technologies, brands and talent. Monopolies raise prices and reduce output from the competitive level, lowering total welfare. While this harms consumers, monopoly is necessary for firms to cover fixed costs and survive in capitalism. Orthodox economists emphasize perfect competition even though monopoly is the norm, in order to make capitalism appear to maximize welfare, but their model ignores economic realities.
1. Price Discrimination Cartoon
Interview Style.
Hi, my name is Bill Gates, the current
chairman of Microsoft which is the world’s
largest personal computer software company.
Microsoft is an example of a Monopoly and so
is known as a Price Maker because it
dominates the Windows Market.
Monopoly companies often are involved in
Price Discrimination because they have market
power.
Hi Bill, I’m
Jack!What is
Price
Discrimination?
That’s a very good question Jack.
Basically, it is when firms try to
sell the same good to different
customers for different prices
even though the costs of
producing for the two customers
are the same.
2. But why
would a
monopolist
do this Bill?
Well Jack, they would do this to maximise
profits for the firm.
Remember that Marginal Cost is the
change in total cost that arises when
quantity produced changes by one unit. A
monopolist charges above marginal cost.
They charge the customer a price closer to
his or her willingness to pay.
Think of when a new book is published
such as Harry Potter. At first an expensive
hardback edition is released and
eventually a cheaper paperback one is the
difference in the printing costs between
the two is very little compared to the
difference in price but it is based on the
willingnessof the customer to pay. The
'eager' fans will pay more at first than
those who wait.
3. But Bill, how do
you know a
customer’s
willingness to pay?
Well Jack, Perfect Price Discrimination is when the
monopolist knows exactly the willingness to pay of
each customer and can charge them a different price
But in reality price discrimination is not always
perfect.
Normally firms divide their customers into groups
based on age, income,nationality.
Below are examples of price discrimination.
4. Cinemas price
Airlines also price
discriminate by
discriminate by
offering different prices When a firm offers a
dividing customers into
to children,adults and discount the also price
personal and business
senior citizens because discrimiinate. They can
travellers. Business
they know seniors do this by offering
travallers have a higher
citizens and children coupons or lower
willingness to pay. Also
have a lower prices to those that
the time of year will
willingness to pay. The buy higher quantities
affect the price as
price of providing the of a good.
well.e.g at Christmas
seat is the same for
time prices go up.
everyone.
6. Public Policy Toward Monopolies
Are Monopolies a
good thing? And if not
how can you respond
to them?
Hi Jack! I am Enda Kenny, Head of the Irish
Government and I’m going to be talking about
Public Policy Towards Monopolies.
No they are not because they charge prices above
marginal cost and fail to allocate their resources
efficiently.
Policy Makers in the Government can respond to
this problem in 4 ways:
7. 1.More 2.Regualte
Competitive Behaviour of the
Industry Monopolies
3.Public 4.Doing Nothing
Ownership at all
H Jack! I’m Michael O’Leary, the CEO of Ryanair. I am
going to be talking about the first way a government
can respond to a monopoly which is to make the
industry more competitive.
Governments to promote competition in an Industry
will closely examine a proposed merger between two
companies that already have a significant a market
share.
8. How and why would a
Government do that?
Well Jack, take for example how, at the moment, I am
trying to take over Aer Lingus. Since Ryanair and Aer
Lingus are two of the biggest competing airlines in the
market the consequences of the merger need to be
closely examined because it could make the market less
competitive!
In Europe each country has their own Competition
Authority. These National Competition Authorities co-
operate with each other and with the Eu Competition
Commission through the ECN( European Competition
Network). Take a look below Jack!
The ECN
National Other National EU
Competition Competition Competition
Authorities. Authorities. Commission.
9. Ah I see how the ECN
works now! Thanks
Michael!
Take a look at this
video from Financial
News about the
takeover bid!
http://www.youtube.com/watch?v=S4rZ_-dKxlw
But how are these
competition laws
enforced Michael?
10. All National Competition
Legislation has to be in line with
EU Legislation overall.
Cross border cases are dealt
with by EU Law
And what do these
laws cover Michael?
Below is an easy to read
diagram to help you
understand the areas
covered by law.
11. Against Cartels
which prevent
Free Trade.
To Ban anti- Monitor and
competitive Examine
price Acquisitions
strategies such and Joint
as price fixing. Ventures.
But remember Jack, mergers
can also be beneficial.
Companies can merge to lower
costs through more efficient
production. These are known as
synergies
I’m backto explain the second
way governments can respond
to a monopoly and that is
through Regulation!
12. Welcome Back Enda!
How does the
Government do this?
Can you give me
some examples?
Think of Natural Monopolies that
you know such as utility companies
like gas, water and electricity.
We the government regulate their
prices and stop them charging the
price they want!
13. Oh yeah I
know some
examples!
Yes Jack they are some
examples of utility companies
that the government regulates!
The next question to decide is
how the government should set
a price for a natural monopoly?
14. And how does the
government set
this price Enda?
Firstly you cannot set the price equal to
the company’s marginal cost because
in general natural monopolies have a
declining average total cost and
marginal cost is less than this so if the
price was set to equal the marginal
cost, the company would lose money!
15. For a Natural Monopoly
AVERAGE COST > MARGINAL COST
So how does
the regulator
respond to this
price problem?
They can
SUBSIDISE the
monopolist.
But how do they raise
the money to pick up
the losses from this
marginal cost pricing?
16. They raise money through
TAXATION.
Firms in a Competitive Market benefit
from lower costs because this leads to
higher profits.
However when costs fall for a
monopoly the regulator will reduce
the price so there is no incentive for a
monopoly to lower costs.
17. Public Ownership of a Monopoly
So far Jack we have looked at two
ways in which a government can
respond to a monopoly. That is by
making the industry more
competitive and by regulation.
And what is the third
way Enda?
Public Ownership
18. Oh yes I know that this
is called a nationalised
Industry! The
government runs the
monopoly!
Yes Jack! And now that you have
been studying economics, which
do you think is better, private or
public ownership?
Well a private firm would have more
of an incentive to lower costs
because that will mean higher
profits but with public ownership if
they firm loses money the taxpayer
will have to pay the losses!
An excellent point Jack.
Look below for some examples of
Public Owned Companies in
Ireland.
19. Doing Nothing
The 3 ways to deal with a
monopoly that we have
discussed also have drawbacks.
So the government can also do
nothing and let them regulate
themselves.
20. Okay Enda so now that we
have discussed a monopoly I
think I can draw some
conclusions about them!
Inefficiences can be mitigated
Charge prices above marginal
through Price Discrimination
cost , causing deadweight
or by Policy Makers like the
losses.
Government.
Monopoly
Monopoly power is limited
Downward Sloping Demand because they cannot raise
Curve. prices too much because of
substitutes.
Yes Jack they are all excellent
conclusions about a monopoly. I hope
that you have learned the difference
now between a monopoly and a
competitive firm! I have summarised
them for you below!
22. Many Firms
Cannot earn
economic
MR=MC
profits in the
long run.
Price
Discrimination Price=MC
not Possible
Monopoly
23. One Firm
Can earn
economice
MR=MC
Profit in the
long run.
Price
Discrimination Price > MC
is Possible
Thank you so much Enda, Michael, Bill and
Harry! I have learnt a lot about what price
discrimination is and about the behaviour of
monopolies in our society!
I even have now some interesting real life
examples of them and it was great to get insight
from some of the people behind them!