CHAPTER+15-SSJJ

=Chapter 15= =Monopoly=

competitive firm = price taker // monopoly = price maker
- a market in which the monopoly firm operates is called a monopoly market. - the firm and the industry are **one and the same** - because a monopoly firm faces the industry demand curve, it can pick the most profitable point on that demand curve

The Cause of Monopoly
Three sources of barriers to entry 1) Ownership of a key resource 2) Legal barriers 3) Economies of scale (Natural monopoly)
 * the government gives a single firm the exclusive right to produce some good
 * patent and copyright laws
 * a natural monopoly arises when there are economies of scale over the relevant range of output
 * with natural monopoly, it is more efficient to have one firm produce the good
 * unless government intervenes, only one seller would survive-market would naturally become a monopoly

Monopoly v. Competition



 * Because a competitive firm can sell as much or as little as it wants at this price, the competitive firm faces a horizontal demand (The first graph)
 * The competitive firm sells a produt with many perfect substitutes. The demand curve that any one firm faces is perfectly elastic.
 * The products of all the other firms in its market

=A Monopoly's Revenue= Demand curve in Monopoly
 * Unlike perfect competition, the demand curve for a monopolist's product is downward sloping

Summary of Monopoly
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Dead Weight Loss created in monopoly
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Sources: [|http://www.youtube.com/watch?v=Uyq7srTy7Zg] http://www.youtube.com/watch?v=gyQlOBKSSh8 http://www.youtube.com/watch?v=lBsyxvJrCO4