THE WELFARE COST OF MONOPOLY

THE WELFARE COST OF MONOPOLY Is monopoly a good way to organize a market?·We have seen that a monopoly, in contrast to a competitive firm, charges a price above marginal cost. From the stans point of consumers, this high price makes monopoly undesirable. At the same...

CASE STUDY

CASE STUDY MONOPOLY DRUGS’ VERSUS GENERIC DRUGS According to our analysis, prices are determined differently in  monopolized markets and competitive markets. A natural place to test this theory is the market for pharmaceutical drugs because this market takes on...

A MONOPOLY’S PROFIT

 A MONOPOLY’S PROFIT This equation for profit (which also holds for competitive firms) allows us to measure the monopolist’s profit in our graph. Consider the shaded box in ‘Figure 5. The height of the box (the segment BC) is price minus...

PROFIT MAXIMIZATION

PROFIT MAXIMIZATION Now that we have considered the revenue of a monopoly firm, we are ready to examine how such a firm maximizes profit. Recall from Chapter 1 that one of the Ten Principles of Economics is that rational people think at the margin. This lesson is as...

A MONOPOLY’S REVENUE

A MONOPOLY’S REVENUE Consider a town with a single producer of water. Table 1 shows how the monopoly’s revenue might depend on the amount of water produced. TABLE 1 A Monopoly’s Total, Average, and Marginal Revenue The first two columns show the...

MONOPOLY VERSUS COMPETMON

MONOPOLY VERSUS COMPETMON The key difference between a competitive firm and a monopoly is the monopoly’s ability to influence )he price of its output. A competitive firm is small relative to ‘the market in which it operates and, therefore, I has no power...