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CH 12
CH 12
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Imperfect Competition
and Market Power
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Defining Industry Boundaries
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Pure Monopoly
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Barriers to Entry
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Barriers to Entry
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Barriers to Entry
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Barriers to Entry
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Price: The Fourth Decision Variable
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Price and Output Decisions in Pure
Monopoly Markets
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Price and Output Decisions in Pure
Monopoly Markets
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Price and Output Decisions in Pure
Monopoly Markets
For a monopolist, an
increase in output involves
not just producing more
and selling it, but also
reducing the price of its
output to sell it.
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Marginal Revenue and Total Revenue
A monopolists marginal
revenue curve shows the
change in total revenue
that results as a firm
moves along the segment
of the demand curve that
lies exactly above it.
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Price and Output Choice for a Profit-
Maximizing Monopolist
A profit-maximizing
monopolist will raise
output as long as
marginal revenue
exceeds marginal cost
(like any other firm).
The profit-maximizing
level of output is the
one at which MR = MC.
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
The Absence of a Supply
Curve in Monopoly
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Price and Output Choices for a Monopolist
Suffering Losses in the Short-Run
It is possible for a
profit-maximizing
monopolist to
suffer short-run
losses.
If the firm cannot
generate enough
revenue to cover
total costs, it will
go out of business
in the long-run.
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Perfect Competition and
Monopoly Compared
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Perfect Competition and
Monopoly Compared
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
The Social Costs of Monopoly
Monopoly leads to
an inefficient mix of
output.
Price is above
marginal cost, which
means that the firm
is underproducing
from societys point
of view.
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
The Social Costs of Monopoly
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Rent-Seeking Behavior
Rent-seeking behavior
refers to actions taken by
households or firms to
preserve positive profits.
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Public Choice Theory
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Remedies for Monopoly:
Antitrust Policy
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Landmark Antitrust Legislation
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Landmark Antitrust Legislation
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Landmark Antitrust Legislation
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
The Enforcement of Antitrust Law
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
The Enforcement of Antitrust Law
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Natural Monopoly
A natural monopoly is an
industry that realizes such
large economies of scale in
producing its product that
single-firm production of that
good or service is most
efficient.
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
Natural Monopoly
2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair