ECO101H1 Chapter Notes - Chapter 13: Market Failure, State Ownership, Demand Curve
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ECO101H1 Full Course Notes
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Market power: ability to raise price above competitive level. Can continue earning economic profit in long run. Actions of competitors son to affect demand curve for firm"s product. Natural monopoly: sustained by increasing returns to scale. Minimum efficient scale large relative to market size. Market too small to support more than one firm. One firm supplying entire market is cheaper than several firms. Network externality: value of good or service greater when many others use it. Firm with largest network of customers has advantage. Firm with deep pockets can sell at loss to gain large customer base. Up to 20 years from date of filing. Copyright: gives creator of artistic work sole right to profits from work. Gives incentives to innovate if work is protected. For monopoly, price decreases with increased out put. Mc is less than or equal to mr. Merger could be beneficial if firm costs are decreased. Can price based on efficiency rather than profit maximization.
