Tài liệu Monopoly docx

© 2003 McGraw-Hill Ryerson Limited.   Chapter 12 Chapter 12 © 2003 McGraw-Hill Ryerson Limited.    ◆ Monopoly is a market structure in which a single firm makes up the entire supply side of the market. ◆ Monopoly is the polar opposite of perfect competition. © 2003 McGraw-Hill Ryerson Limited.    ◆ Monopolies exist because of barriers to entry into a market that prevent entry by new firms. ◆ Barriers to entry include legal barriers such as a patent, and natural barriers such as the size of the market that can support only one firm. © 2003 McGraw-Hill Ryerson Limited.          ◆ A competitive firm is too small to affect the price. ◆ It does not have to take into account the effect of its output decision on the price it receives. © 2003 McGraw-Hill Ryerson Limited.          ◆ A competitive firm's marginal revenue is the market price. ◆ A monopolistic firm’s marginal revenue is not equal to its price – it takes into account that in order to sell more it has to decrease the price of its product. © 2003 McGraw-Hill Ryerson Limited.          ◆ Monopolist as the only supplier faces the entire market demand curve. ◆ Therefore, monopoly demand is downward sloping, and to increase output the firm must decrease its price. © 2003 McGraw-Hill Ryerson Limited.    ◆ How much should a monopoly produce to maximize its profit? ●    and! © 2003 McGraw-Hill Ryerson Limited. "     ◆ As in perfect competition, profit for the monopolist is maximized at a point where MC = MR. ◆ What is different for a monopolist – marginal revenue does not equal price; marginal revenue is below price. © 2003 McGraw-Hill Ryerson Limited. #     ◆ If a monopolist deviates from the output level at which marginal cost equals marginal revenue, profits will fall. © 2003 McGraw-Hill Ryerson Limited. $  !"  !" # # $%&'%#&() $%&'%#&() [...]... McGraw-Hill Ryerson Limited 12 - 27 The Welfare Loss from Monopoly x A single price monopoly creates welfare losses x Welfare losses can be illustrated by the area of consumer and producer surplus that is lost due to smaller output produced, compared to output produced in perfect competition © 2003 McGraw-Hill Ryerson Limited 12 - 28 The Welfare Loss from Monopoly Compare the normal monopolist's equilibrium... Monopoly But the monopolist's MR is below its price, thus its equilibrium output is different from a competitive market x The welfare loss of a monopolist is represented by the triangles B and D x © 2003 McGraw-Hill Ryerson Limited 12 - 30 The Welfare Loss from Monopoly, Fig 12-5, p 262 Price MC PM C PC D B A 0 QM MR QC D Quantity © 2003 McGraw-Hill Ryerson Limited 12 - 31 The Welfare Loss from Monopoly. .. the monopolist will charge x © 2003 McGraw-Hill Ryerson Limited 12 - 15 Comparing Monopoly and Perfect x Profit-maximizing output for the Competition monopolist, like profit maximizing output for the competitor in a perfectly competitive market is where MC = MR © 2003 McGraw-Hill Ryerson Limited 12 - 16 Comparing Monopoly and Perfect x Because the monopolist’s marginal Competition revenue is below... Limited 12 - 35 The PriceDiscriminating x A perfect price discriminating monopoly Monopolist can extract the most consumers are willing to pay for each unit of the product it sells x All consumer surplus is transferred to the monopolist © 2003 McGraw-Hill Ryerson Limited 12 - 36 The PriceDiscriminating x A perfect price discriminating monopoly Monopolist will stop expanding its output when MR = MC, which... Loss from Monopoly Welfare loss is often called the deadweight loss or welfare loss triangle x It is the geometric representation of the welfare cost in terms of misallocated resources that are caused by monopoly x © 2003 McGraw-Hill Ryerson Limited 12 - 32 The PriceDiscriminating x Price discrimination is the ability to Monopolist charge different prices to different customers © 2003 McGraw-Hill Ryerson... Determine the monopolist's profit (loss) by subtracting average total cost from average revenue (P) at that level of output and multiply by the chosen output x © 2003 McGraw-Hill Ryerson Limited 12 - 23 Monopoly x A monopolist can make a profit, it can break even, or it can incur a loss © 2003 McGraw-Hill Ryerson Limited 12 - 24 A Monopolist Making a Profit, Fig 12-3, p 261 MC Price PM CM ATC A Profit . Limited.    ◆ Monopoly is a market structure in which a single firm makes up the entire supply side of the market. ◆ Monopoly is the polar opposite. Limited.          ◆ Monopolist as the only supplier faces the entire market demand curve. ◆ Therefore, monopoly demand is downward sloping, and to increase output the firm must