Chp. 15

Chapter 15 is about Monopolies. Within the market for a monopoly are barriers of entry Monopoly resources: a key resource required for production is owned by a single firm (ex. Companies supplying water), Government regulation: the government gives a single firm the exclusive right to produce some good or service (ex. Copyright), and Production process: a single firm can produce output at a lower cost than can a larger number of producers. Natural monopolies: a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms. Monopolies are Less concerned with other firms trying to enter the market and People that would enter the market would know that they cannot benefit from the same things that monopolists benefit from because they couldn’t achieve the same low costs and ATC curve continually declines. The trend of a monopolist’s demand curve is downward sloping curve because the monopoly has to accept a lower price if it wants to sell more output. The Monopolist’s marginal revenue is always less than the price of its good because of its downward sloping curve Output effect: more output is sold, so Q is higher, which tends to increase total revenue. The price effect: the price falls, so P is lower, which tends to decrease total revenue and Because the price on all unites sold must fall if the monopoly increases production, marginal revenue is always less than the price.