Textbook Notes (368,588)
Canada (161,988)
Economics (923)
ECN 104 (387)
Chapter 8

Chapter 8

5 Pages
Unlock Document

ECN 104
Halis Yildiz

Chapter 8: Monopoly 8.1 Characteristics of Monopoly • An industry in which one firm is the sole producer (seller of a product/service for which no close substitutes exist • Single seller: the firm & industry are synonymous • No close substitutes: product is unique • Price-maker: controls total quantity supplied, has considerable control over price; can change price by changing production quantity; can sell a much/little as it wants • Blocked entry: certain barriers keep potential competitors from entering industry • Non price competition: product produced may be standardized (natural gas, electricity) engage mainly in public relations advertising or differentiated (windows, Frisbees) sometimes advertise products’ attributes Barriers to Entry • Anything that artificially prevents the entry of firms into an industry • Strong barriers effectively block all potential competition; weaker barriers permit oligopoly & entry of competing firms • Economies of Scale (natural monopoly) • Single firm can supply good/service to entire market at smaller cost than two+ firms • Aries when there is economies of scale over relevant range of output • When ATC declines, least-cost production is realized • Legal Barriers: Patents & Licenses • Patents: exclusive right of an inventor to use/allow another to use their invention; protect inventory from rivals, provide a monopoly position for life of patent www.notesolution.com • Licenses: limiting entry into an industry/occupation • Ownership /Control of Essential Resources • Use of private property as an obstacle to rivals • Owns/controls a key resource essential to production process can prohibit entry of rival firms • Pricing and Other Strategic Barriers • Entry may be blocked by the response of monopolist to entry attempts by rivals • Create entry barrier by cutting its price, stepping up advertising, actions to make it difficult for entrant to succeed Monopoly Demand • Status is secured • Firm is not governmentally regulated • Firm is a single price monopolist: firm changes the same price for all units • Marginal revenue is less than price: • Can increase sales only by charging lower price • Monopolist is a Price – Maker: • Firms with downward sloping demand curves • Monopolist sets price in elastic region of demand www.notesolution.com **RECALL: Elastic demand, decline in price will increase TR Inelastic demand, decline in price wi
More Less

Related notes for ECN 104

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.