Monopoly Story of NES, Comcast, even Central Parking.
-
Upload
carmella-stafford -
Category
Documents
-
view
220 -
download
0
Transcript of Monopoly Story of NES, Comcast, even Central Parking.
![Page 1: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/1.jpg)
Monopoly
Story of NES, Comcast, even
Central Parking
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 2: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/2.jpg)
Cost and Monopoly Profit Maximization
Calculating Monopoly Profit
On Making Higher Profits: Price Discrimination
The Social Cost of Monopolies
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 3: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/3.jpg)
MonopolistA single supplier that comprises its entire industry for a good or service for which there is no close substitute
Definition of a Monopolist
QuickTime™ and aTIFF (Uncompressed) decompressorare needed to see this picture.QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 4: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/4.jpg)
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
Barriers to prevent entry of other
make long-run economic profits and legally prevent other firms from entering.
How to become a monopoly
![Page 5: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/5.jpg)
The firm owns the resources to make the product without close substitutes:
If you owned all the oil reserves, who could enter the refining business?
The Aluminum Company of America (ALCOA) at one time owned 90% of the world’s bauxite.
Barriers to Entry
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 6: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/6.jpg)
Problems in raising adequate capital by other firms
Choose a product that requires a substantial capital investment: others cannot get enough to open a businessWhy not enter the microprocessor market and compete with Intel?
Barriers to Entry
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
Other barriers
![Page 7: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/7.jpg)
Economies of scaleYou have cut your costs so low that it drives rivals out who can not meet you’re your costs per unit and your low price.
Natural monopoly
other barriers
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 8: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/8.jpg)
Legal or governmental restrictions
Licenses, franchises, and certificates of convenience patents copyrights
Is the postal service still a monopoly?Consider
UPSFedXFax machinesThe Internet
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
Government created barriers
![Page 9: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/9.jpg)
Firms create their own monopoly
$CartelsAn association of producers in an industry that agree to set common prices and output quotas to prevent competition
MKR calls them producers monopolies
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 10: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/10.jpg)
Types of monopoliesGeographicNatural: over time developsTechnological: you have a patent that allows you to produce a product cheaply or more efficientlyGovernment createdResource monopoly: iron, coal, bauxite etc.
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 11: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/11.jpg)
Assumptions of monopolyOne firm that is the whole industry
Unique product or service
Consumers know there is one producer with a unique product that has no close substitutes and the firm knows it has no competitionBlocked entry
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 12: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/12.jpg)
Results for a monopolistIt has market power
It can set price
It will produce at MR=MC but it will set price directly above on the demand curve. Look down from MR=MC for quantity and above for price
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 13: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/13.jpg)
Demand curve
Monopolist’s demand = market demandMonopolist is the industry
Remember the purely competitive firm has a perfectly elastic horizontal demand curve
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 14: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/14.jpg)
Demand Curves Perfect Competitor Monopolist
Figure 24-2, Panels (a) and (b)
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 15: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/15.jpg)
MonopolyPerfect Competition
Single Seller who has market power and is a price setter
Is the market demandcurve
Must lower price to sell more
MR < P
P>MR=MC
Dead weight lossRestricts output
One of many sellers with no market power and is price taker
Perfectly elastic demand (price takers)
Must only produce moreto sell more
All units sold for sameprice (P = MR)
Consumer and producer surplus equal
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 16: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/16.jpg)
Figure 24-3
Marginal Revenue: Always Less Than Price
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 17: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/17.jpg)
ElasticityA monopoly is a single seller of a well-defined good or service with no close substitutes.
If there are substitutes,the greater the price elasticity of demand of the monopolist’s demand curve
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 18: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/18.jpg)
Price Searcher or Price SetterA firm that must determine the price-output combination that maximizes profit because it faces a downward-sloping demand curve
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 19: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/19.jpg)
Monopoly Costs, Revenues and Profits
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 20: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/20.jpg)
Figure 24-4, Panels (b) and (c)
Monopoly Costs,Revenues, and Profits
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 21: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/21.jpg)
Why produce where marginal revenue equals marginal cost?
Producing past where MR = MCAdditional cost > additional revenue
Producing less than where MR = MCAdditional revenue > additional cost
Cost and Monopoly’sProfit Maximization
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 22: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/22.jpg)
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
• What is the Profit Maximizing RuleTotal costs
Total costs
Total revenue
Total revenue
Maximum
Maximum
QUANTITY
DOLLARS
Slope equals price.
Slope equals marginal cost.
QUANTITY
DOLLARSSlope equals marginal revenue.
Slope equals marginal cost.
![Page 23: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/23.jpg)
Maximizing Profit
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
Maximizing ProfitsWhere MR=Mc
![Page 24: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/24.jpg)
10_04
1 92 83 74 5 6 10
200
150
100
50
0
DOLLARS
QUANTITY
Marginal cost (MC)
Demand
Marginal revenue (MR)
Profit Max is Where MR = MC (fig 10.4)
![Page 25: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/25.jpg)
Calculating Monopoly Profit
If price above ATC
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 26: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/26.jpg)
TR = P * Q
= TR - TC
TC = ATC * QQuantity
MC
ATC
Pri
ce o
r C
ost (
$)
Monopoly
DMR
QM
PM
Model of a MonopolyPositive Economic Profits
![Page 27: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/27.jpg)
Monopoly not always profitable
If price belowATC in short runthen Loss min
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
![Page 28: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/28.jpg)
TR = P * Q
= TR - TC
TC = ATC * QQuantity
MC
ATC
Pri
ce o
r C
ost (
$)
Monopoly
DMR
QM
PM
Model of a MonopolyPositive Economic Profits
![Page 29: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/29.jpg)
• On Making Higher Profits: Price DiscriminationNecessary conditions for price discrimination
–The firm must face a downward-sloping demand curve
–The firm must be able to separate its consumers into
two different markets
![Page 30: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/30.jpg)
• The Social Cost of Monopolies– Start with a perfectly competitive market in
long-run equilibrium• Pe: Qd = Qs
• MR = MC
• Pe = MC
• Zero economic profits
![Page 31: Monopoly Story of NES, Comcast, even Central Parking.](https://reader036.fdocuments.in/reader036/viewer/2022062321/56649ef65503460f94c09ede/html5/thumbnails/31.jpg)