Скачать презентацию 10 Pure Monopoly Mc Graw-Hill Irwin Copyright 2012 Скачать презентацию 10 Pure Monopoly Mc Graw-Hill Irwin Copyright 2012

ET-10 monopoly.ppt

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10 Pure Monopoly Mc. Graw-Hill/Irwin Copyright © 2012 by The Mc. Graw-Hill Companies, Inc. 10 Pure Monopoly Mc. Graw-Hill/Irwin Copyright © 2012 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Four Market Models Characteristics of the Four Basic Market Models Characteristic Pure Competition Monopolistic Four Market Models Characteristics of the Four Basic Market Models Characteristic Pure Competition Monopolistic Competition Oligopoly Monopoly Number of firms A very large number Many Few One Type of product Standardized Differentiated Standardized or differentiated Unique; no close subs. Control over price None Some, but within rather narrow limits Limited by mutual inter-dependence; considerable with collusion Considerable Conditions of entry Very easy, no obstacles Relatively easy Significant obstacles Blocked Nonprice competition None Considerable emphasis on advertising, brand names, trademarks Typically a great deal, particularly with product differentiation Mostly public relation advertising Examples Agriculture Retail trade, dresses, shoes Steel, auto, farm implements Local utilities LO 1 10 -2

An Introduction to Pure Monopoly • • • Single seller – a sole producer An Introduction to Pure Monopoly • • • Single seller – a sole producer No close substitutes – unique product Price maker – control over price Blocked entry – strong barriers to entry block potential competition Non-price competition – mostly PR or advertising the product Public utility companies • Natural Gas • Electric • Water LO 1 Near monopolies • Intel • Wham-O Professional sports teams 10 -3

Barriers to Entry • Barrier to entry: a factor that keeps firms from entering Barriers to Entry • Barrier to entry: a factor that keeps firms from entering an industry • Economies of scale • Legal barriers: patents and licenses • Ownership of essential resources • Pricing LO 1 10 -4

Monopoly Demand • The pure monopolist is the industry • Demand curve is the Monopoly Demand • The pure monopolist is the industry • Demand curve is the market demand • LO 1 curve • Downsloping demand curve Marginal revenue is less than price 10 -5

Monopoly Demand • Marginal revenue < price • Monopolist is a price maker • Monopoly Demand • Marginal revenue < price • Monopolist is a price maker • Monopolist sets prices in elastic region of demand curve LO 2 10 -6

Output and Price Determination Steps for Graphically Determining the Profit-Maximizing Output, Profit. Maximizing Price, Output and Price Determination Steps for Graphically Determining the Profit-Maximizing Output, Profit. Maximizing Price, and Economic Profits (if Any) in Pure Monopoly Step 1 Determine the profit-maximizing output by finding where MR=MC. Step 2 Determine the profit-maximizing price by extending a vertical line upward from the output determined in step 1 to the pure monopolist’s demand curve. Step 3 Determine the pure monopolist’s economic profit by using one of two methods: Method 1. Find profit per unit by subtracting the average total cost of the profit-maximizing output from the profit-maximizing price. Then multiply the difference by the profit-maximizing output to determine economic profit (if any). Method 2. Find total cost by multiplying the average total cost of the profit-maximizing output by that output. Find total revenue by multiplying the profit-maximizing output by the profit-maximizing price. Then subtract total cost from total revenue to determine the economic profit (if any). LO 2 10 -7

Output and Price Determination Price, Costs, and Revenue $200 175 Pm=$122 MC 150 125 Output and Price Determination Price, Costs, and Revenue $200 175 Pm=$122 MC 150 125 100 75 Economic Profit ATC D A=$94 MR=MC 50 25 0 LO 2 MR 1 2 3 4 5 6 Quantity 7 8 9 10 10 -8

Misconceptions of Monopoly Pricing • Not highest price • Total profit • Possibility of Misconceptions of Monopoly Pricing • Not highest price • Total profit • Possibility of losses LO 2 10 -9

Misconceptions of Monopoly Pricing MC A Pm ATC Loss AVC V D MR=MC MR Misconceptions of Monopoly Pricing MC A Pm ATC Loss AVC V D MR=MC MR 0 LO 2 Qm 10 -10

Economic Effects of Monopoly Pure competition is efficient Monopoly is inefficient S=MC MC P=MC= Economic Effects of Monopoly Pure competition is efficient Monopoly is inefficient S=MC MC P=MC= Minimum ATC Pc D Qc (a) Purely Competitive Market LO 3 Pm Pc b d c a MR D Qm Qc (b) Pure Monopoly 10 -11

Economic Effects of Monopoly • Income transfer • Cost complications • Economies of scale Economic Effects of Monopoly • Income transfer • Cost complications • Economies of scale • X-Inefficiency • Rent seeking expenditures • Technological advance LO 3 10 -12

X-Inefficiency X ATCx ATC 1 X' ATCx' Average Total Cost ATC 2 Q 1 X-Inefficiency X ATCx ATC 1 X' ATCx' Average Total Cost ATC 2 Q 1 LO 3 Q 2 10 -13

Price Discrimination • Price discrimination Price Discrimination • Charging different buyers different prices • Price Discrimination • Price discrimination Price Discrimination • Charging different buyers different prices • Price differences are not based on cost differences • Examples: business travel, electric utilities, movie theaters, golf courses, railroad companies, coupons, international trade LO 4 10 -14

Price Discrimination • Conditions for success: • Monopoly power • Market segregation • No Price Discrimination • Conditions for success: • Monopoly power • Market segregation • No resale LO 4 10 -15

Regulated Monopoly • Natural monopolies • Socially optimal price • Set price = marginal Regulated Monopoly • Natural monopolies • Socially optimal price • Set price = marginal cost • Fair return price • Set price = ATC LO 5 10 -16

Regulated Monopoly Price Pm Pf Fair-Return Price a f Pr r MR Qm LO Regulated Monopoly Price Pm Pf Fair-Return Price a f Pr r MR Qm LO 5 Socially Optimal Price b Qf ATC MC D Qr 10 -17