In this chapter, students will be able to understand: How can price discrimination be fair? Are medallion cabs in New York City monopolists? Why doesn’t the monopolist gouge consumers by charging the highest possible price?,. Inviting you refer. | Chapter 9 Monopoly Key Concepts Summary Practice Quiz Internet Exercises ©2000 South-Western College Publishing * In this chapter, you will learn to solve these economic puzzles: Why doesn’t the monopolist gouge consumers by charging the highest possible price? How can price discrimination be fair? Are medallion cabs in New York City monopolists? * What is a Monopoly? Single seller Unique product Impossible entry into the market * What are the most common Monopolies? Local monopolies are more common real-world approximations of the model than national or world market monopolies * What does it mean to have a Unique Product? There are no close substitutes for the monopolists product * What are some examples of Impossible Entry? Owner of a vital resource Legal barriers Economies of scale * What is a Natural Monopoly? An industry in which the long-run average cost of production declines throughout the entire market * What is unique about a Natural Monopoly? A single firm will produce output at a lower per-unit cost than two or more firms in the industry * What is a Price Maker? A firm that faces a downward-sloping demand curve * What is the difference between Monopoly and Perfect Competition? The D and MR curves of the monopolist are downward sloping; in perfect competition they are horizontal * What is unique about the Demand Curve for a Monopolist? The monopolist demand curve and the industry demand curve are one in the same * 40 20 15 10 5 20 30 35 40 60 80 100 Minimizing Costs in a Natural Monopoly Cost per Unit (dollars) 25 5 firms 2 firms 1 firm Quantity of Output * What determines Price for a Monopolist? Demand * Why is MR * 8 $-25 $-50 $-75 $-100 2 4 6 0 $25 $50 $75 10 12 14 16 18 Monopoly Demand $100 Marginal Revenue Price & Marginal Revenue Q * | Chapter 9 Monopoly Key Concepts Summary Practice Quiz Internet Exercises ©2000 South-Western College Publishing * In this chapter, you will learn to solve these economic puzzles: Why doesn’t the monopolist gouge consumers by charging the highest possible price? How can price discrimination be fair? Are medallion cabs in New York City monopolists? * What is a Monopoly? Single seller Unique product Impossible entry into the market * What are the most common Monopolies? Local monopolies are more common real-world approximations of the model than national or world market monopolies * What does it mean to have a Unique Product? There are no close substitutes for the monopolists product * What are some examples of Impossible Entry? Owner of a vital resource Legal barriers Economies of scale * What is a Natural Monopoly? An industry in which the long-run average cost of production declines throughout the entire market * What is unique about a Natural Monopoly? A
