C11: Monopoly

Question 1

Key diff between monopoly and competitive firm

Answer 1

• Monopoly price maker not taker
• Monopoly influences P by retricting Q

Question 2

Profit max

Answer 2

mc=mr

Question 3

Monopoly profit max graph

Answer 3

Graph

Question 4

Monopoly inefficiency graph

Answer 4

Graph

Question 5

Regulation: Antitrust Laws (Sherman Act)

Answer 5

Prevent monopolies by lowering barriers to entry:
- Not always efficient, sometimes lower prices than PC due to economies of scale
- Example with utility companies that have huge FC, and MC relatively small

Question 6

Regulation: Price Ceilings

Answer 6

Graph
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Government doesn’t know what the socially optimal price/outcome is