Chapter 9 Flashcards
Monopoly
A market
with only one seller of
a product that has no
close substitute
What are the sources of monopoly power?
◦ Legal barriers
◦ Economies of scale
◦ Control of important inputs
The marginal revenue curve for a monopolist lies…
below the demand curve
A monopolist will never knowingly operate in
The inelastic
portion of its demand curve
Equilibrium output is at the point where
MR = MC
If TR >TC
Then the monopolist is generating economic profits
If TR < TC
the monopolist is generating economic losses
If P > ATC
there are economic profits
If P < ATC
there are economic losses
Both monopolists and perfect competitors produce where…
MR = MC
What is the objective of anti-combine laws?
- Prevent monopoly.
- Promote competition.
- Enhance economic
efficiency.
Two approaches to dealing with monopolies
- Anti-combine laws
- Government regulation
Anti-combine criminal
offences include
- Fixing prices
- Bid-rigging
- Predatory pricing
Price Discrimination
is the practice of sellers charging
different prices for the same good or service when costs do
not differ
Conditions for Price Discrimination
- Monopoly power
- Market segregation
- No resale
