Textbook Notes (363,212)
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ECO204Y5 (5)
Chapter 4

ECO204Y5 Chapter 4: Test 4 Notes

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University of Toronto Mississauga
Kathleen Wong

CHAPTER 10: Market Power: Monopoly and Monopsony • Monopoly: a market that has only one seller but many buyers • the demand curve that it faces is the market demand curve; this market demand curve relates the price that the monopolist receives to the quantity it offers for sale • the monopolist’s quantity will be lower and its price higher than the competitive quantity and price • This imposes a cost on society because fewer consumers buy the product, and those who do pay more for it • When economies of scale make monopoly desirable–for example, with local electric power companies–we will see how the government can increase efficiency by regulating the monopolist’s price • Pure monopoly is rare, but in many markets, only a few firms compete with each other • the firms may be able to affect price and may find it profitable to charge a price higher than MC; these firms have monopoly power • Monopsony: a market with many sellers but only one buye
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