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Economics Lecture Nine (view source)
Revision as of 13:32, October 24, 2009
, 13:32, October 24, 2009moved from prior lecture
Is the monopoly able to increase its price without limitation? No. Demand will decrease as the price increases simply because people have limits on what they can spend. Even a monopoly has to live with the demand curve. The marginal revenue is not always positive as price increases, even for a monopoly. At some high price, a further increase in price causes a larger drop in quantity and the marginal revenue goes down. A monopoly does not increase its price when its marginal revenue is less than zero, or when it is less than its marginal cost.
Is the monopoly able to increase its price without limitation? No. Demand will decrease as the price increases simply because people have limits on what they can spend. Even a monopoly has to live with the demand curve. The marginal revenue is not always positive as price increases, even for a monopoly. At some high price, a further increase in price causes a larger drop in quantity and the marginal revenue goes down. A monopoly does not increase its price when its marginal revenue is less than zero, or when it is less than its marginal cost.
natural monopoly (a company that has increasing economies of scale, such that long-run average costs of production decrease, like power companies or railroads)
In a natural monopoly, there is falling ATC and MC, so ATC > MC.
A monopoly shuts down in the short run if when MR = MC, AVC > P.
A monopoly shuts down in the long run if when MR = MC, ATC > P.
<move some of the remaining material to next class?>
<add section about Intellectual Property, including trademarks and copyright; they are monopolies>
<discuss Microsoft here>
<two monopolies: KJV and NIV translations of the Bible, and what the NIV owner plans to do next>
<tale of two towers: WTC and Sears Tower>
==How Monopolies Arise==
==How Monopolies Arise==