ECON 1100 1nd Edition Lecture 26 Outline of Last Lecture I. Explanation of SMB=SMCOutline of Current Lecture I.MonopolyII.Price discriminationCurrent LectureI. MonopolyA lot of manufacturers, but market sales in hands of fewVery few industries are perfectly competitiveMonopoly – market with ingle seller and a barrier to entry (extreme case)Competition policy = anti-trust lawsReason for anti-trust lawsConcern of gauging farmers by train Understanding the extremes (monopoly & perfect competition) helps to understand the middleIn a monopoly market, a product does not have close substitutesMonopoly earns economic profit by increasing price above profit market priceAnti-trust = fine system to work more competitivelyMonopoly is badMesses up answers for what/how/for whomMonopolists tell what to do, but we like choicesMonopoly is inefficient These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Profit max rule: find q where P=MCCan affect PCan choose P & Q, but not independentlyWhat is profit-max QMProfit max rule: find QM where MR=MCMR > MC profitMR < MCIn competitive market MR = P, for monopoly MR < PII. Price discriminationPrice discrimination: selling different units of same product of different pricesHappens all the timeEx. College tuition: in-state vs. out-stateCompletely legal as long as not based on race, religion, etcLower price increases
View Full Document
Unlocking...