Characteristics and Graph of Monopoly

Concepts

Characteristics of Monopoly
- One Firm
- No Close Substitutes (One-of-a Kind Product)
- Very Significant Barriers to Entry (Extremely Difficult to Enter)
Sources of Monopoly Power
- Buy Up All the Resources
- Government Protection
  - Patents
  - Copyrights
  - Licenses
- Natural Monopoly
Revenue Analysis: PC Firm vs. Monopoly
- Relationship Between Demand and Marginal Revenue
  - Price Discrimination
  - Single-Price Firm
- “Revenue Sacrificed”
Monopoly Graph
- Demand Curve (D = P = AR)
  - Relatively Steep (Inelastic Demand in Monopoly)
- Marginal Revenue (MR)
  - “Revenue Sacrificed” (P > MR)
- Marginal Cost
- Profit Maximization (MC = MR)
  - Trace Up to Find Price
  - Price Maker (P>MC)
- Shifting D and MR
  - Impact on Profit Max P and Q
- Shifting MC
  - Impact on Profit Max P and Q
- Average Total Cost (ATC)
  - Economic Profit (P>ATC)
  - Economic Loss (P<ATC)
  - Zero Economic Profit, Normal Profit, Breakeven (P=ATC)
- Average Variable Cost (AVC)
  - Stay Open vs. Shut Down
    - P > AVC (Stay Open)
    - P = AVC (Stay Open)
    - P < AVC (Shut Down)

Coming Soon

Intro to Monopoly Video

Characteristics and Graph of Monopoly Lecture Video

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