01:220:102 Lecture Notes - Lecture 18: Market Power, Demand Curve, Marginal Revenue

85 views4 pages
Published on 2 Nov 2018
ECON 102 - Lecture 18 - Monopoly
The Meaning of Monopoly
A firm that is the only producer of a good with no close substitutes
An industry controlled by a monopolist is known as a monopoly
Market power
The ability of a firm to raise prices
Single seller: a sole producer
No close substitutes: unique product
Price maker: control over price
Blocked entry: strong barriers to entry
Non-price competition: mostly PR or advertising the product
What a Monopolist Does
A monopolist reduces the quantity supplied to Qm and moves up the demand curve from
C to M, raising the price to Pm
Why Do Monopolies Exist?
How do they get away with this and protect their profit from new firms?
Profits will not persist in the long run unless there is a barrier to entry
Barriers to Entry
Barriers to entry are essential for monopolies. They generate profit for the monopolist in
the short run and long run
This can take the form of
Control of natural resources or inputs
Increasing returns to scale
Unlock document

This preview shows page 1 of the document.
Unlock all 4 pages and 3 million more documents.

Already have an account? Log in

Get OneClass Notes+

Unlimited access to class notes and textbook notes.

YearlyBest Value
75% OFF
$8 USD/m
$30 USD/m
You will be charged $96 USD upfront and auto renewed at the end of each cycle. You may cancel anytime under Payment Settings. For more information, see our Terms and Privacy.
Payments are encrypted using 256-bit SSL. Powered by Stripe.