Chapter 8 - Pure monopoly. This chapter is divided into six basic sections: the characteristics of pure monopoly, the barriers to entry that create and protect monopolies, price and output determination under monopoly, the economic effects of monopoly, price discrimination under monopoly, and the regulation of monopolies.
Trang 1Pure Monopoly
Chapter 8
McGrawHill/Irwin Copyright © 2014 by The McGrawHill Companies, Inc. All rights reserved
Trang 2entry block potential competition
advertising the product
Trang 3• Public utility companies
• Natural gas
• Electric
• Water
• Near monopolies
• Intel
• Wham-O
• Professional sports teams
83
Trang 4firms from entering an industry
Trang 5demand curve
Trang 6Revenue and Cost Data of a Pure Monopolist
Revenue Data Cost Data
(1)
Quantity
of Output
(2) Price (Average Revenue)
(3) Total Revenue (1) X (2)
(4) Marginal Revenue
(5) Average Total Cost
(6) Total Cost (1) X (5)
(7) Marginal Cost
(8) Profit (+) or Loss (-)
1 162 162 $ 162 $ 190.00 190 $ 90 -28
10 72 720 -18 103.00 1030 150 -310
Monopoly Demand
Trang 7LO2
D
Gain = $132 Loss = $30
• All customers must pay the same price
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Trang 82 4 6 8 10 12 14 16 18
$200
150
100
50 0
Quantity
D
MR
Trang 9region of demand curve
89
Trang 10175
150
125
25
100
75
50
Quantity
Output and Price Determination
0
D
MR
ATC MC
MR=MC
A=$94
Economic
Profit
Trang 11811
Trang 12(a) Purely competitive market
(b) Pure monopoly
P=MC=
Minimum ATC
MR
P c
Q c
P c
P m
Q c
Q m
Pure competition is efficient
Monopoly is inefficient
a
b
c d
Trang 13813
Trang 14• Price discrimination
• Charging different buyers different prices
• Price differences are not based on cost differences
• Conditions for success:
• Monopoly power
• Market segregation
• No resale
Trang 15Examples of Price Discrimination
Trang 16Ps
Pb
Ds
Economic
Trang 17• Antitrust laws
• Break up the firm
• Regulate it
• Government determines price and quantity
• Ignore it
• Let time and markets get rid of monopoly
Trang 18Competition from Foreign Multinational Corporations