ECON 1B03 Lecture Notes - Lecture 24: Monopolistic Competition, Price Discrimination, Deadweight Loss

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Hannah Holmes

Document Summary

Monopolies are socially inefficient, so government gets involved: Competition law legislation prevents mergers that would aka market less competitive. Regulations government agencies regulate prices a monopoly may charge. Often at p = atc so firm earns normal profit if this price means monopoly would run a loss, government could subsidize firm. Public ownership -- government can run monopoly itself. Crown corporations in canada ex canada post, cbc, go transit. May not run efficiently because the government may not care as much as private firms to keep costs down. Government may decide to do nothing and stay out of it. Business practice of selling same good at different prices to different customers even though the cost of producing is the same. Not possible in competitive market, since there are so many firms selling at market price. Firm must have some market power a(cid:374)d (cid:271)e a(cid:271)le to seg(cid:373)e(cid:374)t the (cid:373)arket a(cid:272)(cid:272)ordi(cid:374)g to (cid:272)o(cid:374)su(cid:373)er"s willingness to pay.