15- Monopoly.pdf

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University of California - Irvine
Amihai Glazer

Why Monopolies Arise Section 151 pp 3003031 monoplies ariseArst of a monopoly is when when a sole seller controls the market for a agood or service with little to no substitutesthe roots of the monopolybcontrol on natural resource1government regulation2if the gov grants a particular right to only produce a productApattoncopyrightsBnatural monopoly the production process3a single rm can produce a larger sum of out put then could a large Aamount of rms eg water companyBHow Monopolies Make Production and Pricing Decisions Section 152 pp 2303310 monopoly vs competitionAunlike a competitive market a monopoly has the power to inuence apricebecause the monopoly is the sole producer it demand curve is the bmarket demand curveA monopolys revenueBaverage revenue is always equal to the price of the good aits marginal revenue is always less then the price of the goodboutput effect more Q is sold increasing total revenuecprice effect price falls which decreases total revenuedProt maximizationCA monopolists max prot is determined by MRMC awhere marginal revenue intersects with marginal cost then hits the 1demand curve is max price AN important diff between competitive rm MR P and Monopoly 2PMRMCCheck out the graph below3f4f5f6f7f8f9
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