ECON1131 Lecture Notes - Lecture 62: Natural Monopoly, Perfect Competition, Deadweight Loss
5 Dec 2017
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Krugman for ap module 62 notes: welfare effects of monopoly, compare monopoly to perfect competition, qm < qc, pm > pc, monopoly profit is greater than zero, the monopoly output is qm and the price is pm>mc=atc. Total welfare is equal to the total of consumer and producer surplus. This ps is a transfer from consumers to the firm. There is an area that used to belong to cs, but now belongs to nobody. Antitrust laws are in place to deal with the harmful effects of these types of monopolies. Other monopolies are created by massive economies of scale. If this is the case, it s more efficient to allow the natural monopoly to exist, but with regulation to avoid abuse of pricing power and sizeable deadweight loss: monopolies can produce less and charge a higher price. Antitrust laws are in place to stop monopolistic practices: dealing with a natural monopoly, public ownership.
