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Monopoly: Price Searcher

Monopoly: Price Searcher. Monopoly defined One firm Unique product, no close substitutes Barriers to entry. Barriers to Entry. Government franchise Economies of scale Ownership of vital resource. Short-Run Equilibrium in Monopoly. Monopoly demand curve Revenue considerations

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Monopoly: Price Searcher

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  1. Monopoly: Price Searcher • Monopoly defined • One firm • Unique product, no close substitutes • Barriers to entry

  2. Barriers to Entry • Government franchise • Economies of scale • Ownership of vital resource

  3. Short-Run Equilibrium in Monopoly • Monopoly demand curve • Revenue considerations • Cost considerations • Monopoly equilibrium

  4. Evaluation of Monopoly • Wealth transfers from consumer to producer • Positive economic profit in LR • P>MC, price not a good cost signal • Restricted output • DWL to society • Rent seeking behavior • Lack incentives for innovation and efficiency

  5. Multi-Plant Monopoly • Single firm, operating multiple plants with different cost structures • Graphical example • Mathematical example

  6. Natural Monopoly • Decreasing cost industry • Distributional economies • Economies of scale • Solutions to problems • Franchise or nationalize • Regulate

  7. Price Discrimination • Block pricing • Peak load pricing • Case study: College tuition

  8. Comparing Monopoly with Perfect Competition • Social cost of monopoly • Graphically • Algebraically

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