REAL 1820 Lecture Notes - Lecture 7: Rent-Seeking, Price Discrimination, Economic Rent

• School: University of Guelph
• Department: Real Estate and Housing
• Course: REAL 1820
• Professor: Emma Allen- Vercoe

Document Summary

There are two monopoly situations that create two pricing strategies: Single price: single-price monopoly is a firm that must sell each of its output for the same price to all customers. Price setter, not a price taker (cid:271)(cid:272) de(cid:373)a(cid:374)d fo(cid:396) (cid:373)o(cid:374)opol(cid:455)"s output is the (cid:373)a(cid:396)ket de(cid:373)a(cid:374)d. To sell a larger output, a monopoly must set a lower price. Single-price monopoly never produces and output at which demand is inelastic would be able to increase tr, decrease tc and increase economic profit by decreasing output. Makes economic profit in the long run bc barriers protect firm from market entry by competitors. But a monopoly that incurs an economic loss might shut down temporarily in the short run or exit the market in the long run. Compared to perfect competition, a monopoly produces a smaller output and charges a higher price. At competitive equilibrium, msb=msc total surplus maxed; firms produce at lowest long-run.