ECN 104 Lecture 10: ECN104 - Class 10 Notes
Document Summary
Characteristics of monopoly: single seller - a sole producer, no close substitutes - unique product, price maker - control over price, blocked entry - strong barriers to entry block potential competition, non-price competition. Examples of monopoly: public utility companies. Barriers to entry: a factor that keeps firms from entering an industry. Monopoly demand: the monopolist is the industry, demand curve is the market demand curve. Downward sloping demand curve: marginal revenue is less than price. Monopoly demand: marginal revenue is less than price, monopolist is a price maker, monopolist sets prices in elastic region of demand curve. Output and price determination: cost data. Assume competitive factor markets: mr = mc rule, no monopoly supply curve. Misconceptions of monopoly pricing: not highest price, total profit, possibility of losses. Economic effects of monopoly: price, output, and efficiency. Assessment and policy options: legitimate concerns, three policy options. Regulate prices and operations of natural monopolies. Ignore monopolies which are unsustainable over the long term.