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ECON 1116 Chapter Notes - Chapter 15: Sherman Antitrust Act, Economic Surplus, Market Power

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pucealligator647
24 Apr 2017
School
Northeastern University
Department
Economics
Course
ECON 1116
Professor
Michael Stone

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Document Summary

Is any firm really a monopoly: monopoly- a firm that is the only seller of a good or service that does not have a close substitute. All products have substitutes; the closeness of the substitutes is the real problem. Control of a key resource: firms rarely gain his type of control, as resources are widely accessible. How does a monopoly choose price and output: a monopoly"s demand curve is the same as the market demand curve for a product. Marginal revenue once again: price makers not takers. If price makers raise their price they lose some, not all of their customers- face a downward sloping demand/ marginal revenue curve: one good thing- more units sold, one bad thing- less revenue from each unit. Profit maximization for a monopolist: sell up to the point where marginal revenue from selling the last unit equals marginal cost.

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Related Questions

Point out one product that you believe is produced by a "pure" monopoly firm (or a firm with a high degree of monopoly power). Is it a local, regional or national monopoly?

What are some of the Barriers to Entry into this industry?

For the product listed, list substitute(s) for this "monopoly". Demonstrate how the relative "closeness" of the substitutes listed determines, to a large degree, effective limits to the monopoly power of these firms.

Governments often have the potential to influence whether firms are monopolies. How might the government affect whether a firm is a​ monopoly?

The government could

  1. Grant a firm a public franchise, making it the exclusive legal provider of a good or service.
  2. grant a patent to a firm, giving it the exclusive right to produce a product.
  3. Grant a copyright to a firm, making it a neutral monopoly
  4. Grant a firm a public enterprise allowing it to benefit from network externalities
  5. Reduce taxes so that a firm benefits from diseconomies of scale

 

A firm that is a "pure monopoly" is:

   

a. A seller of a highly advertised and differentiated product in a market with low barriers to entry in the long-run.
   

b. The only seller of a good for which there are no good substitutes in a market with high barriers to entry.
   

c. The only buyer of unique raw material.
   

d. The producer of a product subsidized by the government.