ch 15 terms Flashcards
define monopoly
market sales all from one firm
barrier to entry
define barrier to entry
fundamental cause of monopoly
potential competitors can’t compete
what are the three barriers to entry
monopoly resources
govt regulation
natural monopoly
define monopoly resources
key resource owned by one firm
rarely actually causes monopoly
define govt regulation
govt gives one firm exclusive right to produce
ex. bc hydro
define natural monopoly
we can produce at an incomparably low cost
economies of scale
often impacted by market size
monopoly vs perfect competition demand
competitive —
monopoly aka market \
competitive firm MR
p = mr = mc
monopoly mr
p> mr = mc
how to calculate monopoly profit
(p-atc) x q = profit
welfare cost of monopoly
undesirable to consumers
very desirable to producers
price discrimination
firms sells same goods for different prices for different people
define arbitrage
buy good at lower price and sell at higher price to profit from difference
define perfect price discrimination
i know exactly how much everyone is willing to pay and charges them that much
imperfect price discrimination
make guess based on demographic what your willingness to pay is
2nd degree imperfect price discrimination
charge same people different price based on # on units
3rd degree imperfect price discrimination
segments have different elasticities of demand
ex. different age demo at movie theatre
what does graph of price discrimination look like
kinked
public policy around monopoly
try to make monopoly more competitive
prevent mergers
regulate behaviour
force private monopoly into public enterprise
nothing
