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Lecture

Chapter 15 Monopoly

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Department
Economics
Course
EC120
Professor
petersinclair
Semester
Fall

Description
Keith Diaz Chapter 15: Monopoly  A firm that is the sole seller of a product without close substitutes pure monopoly rare - Having a large market share and few significant competitors  Key difference between monopoly and perfect competition is that a monopoly firm has market power, the ability to influence the market price of the product Natural monopoly it sells. A competitive firm has no market power.  main cause of monopolies is barriers to entry 1. A single firm owns a key resource 2. government gives a firm exclusive right to produce good 3. Natural monopoly: a single firm can produce the entire market Q at lower ATC than several firms can; economies of scale over the entire range of output  MC MR = MC - Value to buyers of an additional unit (P) exceeds cost of resources needed to produce unit (MC), because the firm charges P at D where MC = MR - DL: Monopoly Q too low  could increase TS with larger Q Public Policy toward Monopolies  Increasing competition with antitrust laws - Act for the Prevention and Suppression of Combinations Formed in Restraint of Trade (1889), Combi
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