Intermediate Microeconomic Theory I
ECON 2300 – Summer 2011 – Mark Melatos
Topic 6 – Monopoly – June 23
- One producer – the monopolist IS the market.
- Ultimate market (i.e. pricing) power.
- Homogeneous output.
Measuring Monopoly Power
- Pure monopoly is rare.
- However, as long as a firm faces a downward sloping D curve, it does have
some monopoly power – i.e. it can charge P>MC.
- Lerner’s Degree of Monopoly Power:
o Monopoly power ↑ as D curve slope ↑.
o Monopoly power ↓ as D curve slope ↓.
Production with 2+ Plants
- Consider a firm with 2 (or more) factories.
- Firm sells into one market and has some monopoly power in this market.
- Factories have different costs.
o E.g. Ansell produces rubber gloves for hospitals in the U.S. Ansell has
factories in Australia and