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Microeconomics chapter 12 notes

by: Isabelle Hue

Microeconomics chapter 12 notes ECON 1001

Marketplace > University of Cincinnati > Business > ECON 1001 > Microeconomics chapter 12 notes
Isabelle Hue
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About this Document

notes on chapter 12, pure monopoly
Sourushe Zandvakili
Class Notes
pure monopoly, Chapter notes, chapter 12, Microeconomics, Econ




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This 2 page Class Notes was uploaded by Isabelle Hue on Tuesday April 5, 2016. The Class Notes belongs to ECON 1001 at University of Cincinnati taught by Sourushe Zandvakili in Summer 2015. Since its upload, it has received 12 views. For similar materials see Microeconomics in Business at University of Cincinnati.


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Date Created: 04/05/16
PURE MONOPOLY pure monopoly-a market structure in which one firm sells a unique product, into which entry is blocked, in which the single firm  has considerable control over product price and in which nonprice competition may or may not be found —exists when a single firm is the sole producer of a product for which there are no close substitutes. • imperfect competition main characteristics of pure monopoly  • single seller-single firm is sole producer/sole supplies of specific good/service—firm and industry are synonomous • no close substitutes-product is unique, no substitutes  • price maker-(unlike pure competition)-pure monopoly controls the total quantity supplied-thus has considerable control over price ◦ confronts the usual downsloping product demand curve  ◦ can change product price by changing the quantity produced ◦ will use its power whenever its advantageous • blocked entry-no immediate competitors b/c certain barriers keep potential competitors from entering the industry ◦ barriers may be ▪ economic ▪ technological ▪ legal ▪ or some other type  • nonprice competition-product produced may either be standardized (natural gas and electricity) or differentiated (windows are frisbees) ◦ standardized product companies engage in mainly public relations advertising ◦ differentiated product companies often advertise product attributes Examples of Monopoly • pure monopoly is relatively rare • many examples of less pure forms/near monopolies  ◦ government regulated utilities- ▪ gas and electric, water companies, cable tv companies, local telephone companies ◦ professional sports teams ◦ small town barber, train station, airline barriers to entry-anything that artificially prevents the entry of firms into an industry—factors that prohibit others from entering an industry simultaneous consumption-The same-time derivation of utility from some product by a large number of consumers. network effects- Increases in the value of a product to each user, including existing users, a s the total number of users rises. X-inefficeincy -  The production of output, whatever its level, at a higher average (and total ) cost than is necessary for producing that level of output. rent-seeking behaviors-The actions by persons, firms, or unions to gain special benefits from government at the taxpayers'  or someone else's expense. price discrimination -: The selling of a product to different buyers at different prices when the price differences are not justified by differences in cost. socially optimal price-The price of a product that results in the most efficient allocation of an economy's resources and that is equal to the marginal cost of the product. fair-return price-For natural monopolies subject to rate (price) regulation, the price that would allow the regulated  monopoly to earn a normal profit; a price equal to average total cost.


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