Changes

This Lecture is shorter because In this lecture we first take learn the midterm examimportant concept of a "monopoly". Now we are more than halfway through this course. We have already covered all Readers of the basic concepts New Testament in Greek will know what a “monopoly” is by its roots: “monos” means one, and “polein” means “to sell.” A monopoly is only one seller in an industry. Examples are applying them the United States Postal Service for regular mail, many local power companies for your gas or electricity, your cable television provider and, to various new situationssome extent, your local public school system. Monopolies arise for a variety of reasons.

Today we learn the important concept of a "monopoly". Readers of the New Testament in Greek will know what a “monopoly” is by its roots: “monos” means one, and “polein” means “to sell.” A monopoly is only one seller in an industry. Examples are the United States Postal Service for regular mail, many local power companies for your gas or electricity, your cable television provider and, to some extent, your local public school system. Monopolies arise for a variety of reasons.  There are "natural" monopolies, where an industry has increasing economies of scale, such that long-run average costs of production decrease, like power companies or railroads. There are "barriers to entry" that prevent new competition in these entries, because it is so expensive to start a new railroad from scratch (nothing). There are monopolies created by government regulation (the Post Office) or by laws (copyright law is one cause of the Microsoft monopoly) or perhaps even by illegal behavior (Microsoft was found to have violated laws against anti-competitive behavior).

Perhaps the most famous monopoly of all time was John D. Rockefeller’s “Standard Oil,” which controlled most of the oil industry in America around 1900.

What do all these monopolies have in common? In their heyday, they made extraordinary profits. Microsoft still does.

Is the monopoly able to increase its price without limitation? No. The Law of Demand still applies to monopolies: demand will decrease as the price increases simply because people will buy less as the price increases. People have limits on what they will 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 further if its marginal revenue declines to equal its marginal cost. == Monopoly == A monopoly is less defined as a firm that is the only seller in a market, such as the company that supplies electricity to an area. That firm has complete control of its market. There is no supply curve in this market. But note that while the monopoly is the only seller, there are still many buyers: the public. So there is a demand curve. A monopoly is more profitable without competitors than zeroan ordinary firm is in a competitive market. A monopoly is like a football team playing a game without an opponent. The team still has to score touchdowns, or when but it is so easy to do so. A monopoly increases its profit by increasing prices, which it can do because there is no competition and no substitutes. A monopoly reduces its output when it increases its price, as fewer people buy the good due to the Law of Demand (higher price, less demand). As a result, a monopoly produces less output than its marginal costthe efficient quantity (i.e., less than the equilibrium level of output in a competitive market). If you have played the board game called "Monopoly", you might have noticed that the rents on property increase enormously when someone has all two or three properties in a "color group." The player monopolizes property and then obtains much higher rent because it. The player who monopolizes the most property is usually the one who wins. In summary, monopolies are the most profitable companies.

There are several other Here is a list of “barriers to entry” that prevent full competition. They are listed and described below:

*'''''The licensing of professionals creates a barrier to entry'''''. To become a doctor, someone must go to graduate from an accredited medical school (which usually take takes four years), and then pass certain exams. Most doctors also spend several years doing internships and residencies in hospitals. Attorneys, electricians, barbers, and just about every other line of work also have licensing procedures that constitute a “legal barrier to entry” to reduce competitionby others.

*'''''Control of a valuable resource can also create a monopoly'''''. If you owned all the oil wells in the world, then you would essentially have a monopoly. Your would and become the wealthiest person in the worldextremely wealthy. A company called DeBeers once controlled the vast majority of diamond production, giving it a monopoly.

*Finally, there are '''''government grants of monopoly such as patents and copyrights'''''. Thomas Edison still holds the record for receiving the most number of patents for his inventions. He created more economic wealth than any American, or perhaps anyone in history. (Except for Jesus, that is, whose teachings created the potential for unlimited economic wealth in addition to the obvious spiritual wealth.)

Like all “barriers to entry,” they can be misused to suppress competition or even criticism. Consider this: should copyright law apply to versions of the Bible, thereby preventing them from being copied or distributed without the owner's permission? The copyright on the King James Version has expired in the United States, but in England the Crown (King or Queen) still uses copyright to prohibit people from freely copying and distributing itthe King James Version.

Even Bill Gates and the his Microsoft monopoly is limited by the demand curve, and the Law of Demand. Even for a monopoly, the higher its price, the lower its quantity sold. Overall revenue is price times quantity, so a monopoly does not maximize revenue simply by maximizing its price. At highest price extreme, for For example, a monopoly will not charge a price higher than what the wealthiest people will pay.

A monopoly maximizes profit by lowering price until marginal revenue (MR) equals marginal cost (MC). '''''The universal rule of pricing applies to monopolists monopolies just like any other firm: they all sell where MR=MC'''''.

Because a monopoly owns its industry, all of its focus is on the demand curve. There are no competitors. Accordingly, there is no supply curve for any competitors either. '''''There is no market supply curve when there is a monopoly, but there is still a market demand curve for by the publicfor the good'''''.

If a firm can raise the price of its goods or services and still hold on to some of its customers, then it must possess at least some monopoly power. Professional athletes and actors enjoys a bit of a monopoly on their own fans, but competition does exist for those fans.

*In a ''natural monopoly'', there is marginal cost (MC) decreases as size increases, and thus ATC > MC. The falling MC causes ATC (average total cost) to fall also, but it is always bigger than MC

If Suppose the demand curve is P = 1000-100Q, then when . When P=0, then Q=10. That The demand curve intersects the x-axis at Q=10. According to the above rule, the curve for the marginal revenue of a monopoly should intersect the x-axis at Q=5. Its equation should be P=1000-200Q. Is it? Let's do the calculations next.

At Q=5 on the demand curve, P=$500. The revenue at this point is PxQ=$2500. If Q moves decreases to 4 units, then P moves increases to $600 and , but the overall revenue then decreases to PxQ=$2400. If Q moves increases to 6 units, then P moves decreases to $400 and PxQ=$2400 again. Moving Thus, moving quantity in either direction causes revenue to decline, so revenue is at its maximumat P=$500. Marginal revenue, therefore, is no longer greater than zero. In fact, MR=0 for any change in quantity at this point. (If you changed Q by a tiny fraction less than one unit, then you would see that marginal revenue is actually zero at Q=5).

==Honors: Deadweight Loss==

Sometimes monopolies cause even greater harm. Microsoft, to perpetuate its monopoly, makes its software incompatible with competitors in order to force consumers to buy Microsoft products. Users cannot copy text from a Microsoft Word document and paste into a competitive product like WordPerfect, for example. Microsoft would also hire innovate engineers who were When there was a clever, innovative engineer developing something new that at another company, which might be become better than Microsoft products's product, and put these Microsoft would hire the bright people into an office engineer at Microsoft and a higher salary in order to stop their his new workproject at the competitor. It is difficult to measure the enormous The harm caused by that anti-competitive strategyis enormous.

We can measure the harm caused by how a monopoly reduces its output. '''''The reduction in output is always hurtful, because there is a loss in consumer surplus corresponding to the missing output.''''' The loss in consumer surplus is called the "deadweight loss." Economists measure the “deadweight loss” imposed by monopolies in terms of the reduced output Q sold by a monopoly compared to with the greater output that would occur in a competitive environment. The deadweight loss is the disutility imposed on society by a company.

Note Notice that the net loss to society is not the amount the consumers overpay to the monopoly. That is simply a transfer in wealth, without any overall loss in societal wealth. Instead, '''''the "deadweight loss" is only the loss in value due to the reduction in output Q'''''. It is similar to the burden on society of a price control, a rationing system, or a tax, which also reduces the output Q. On a graph it is the area enclosed by three points: the equilibrium P and Q in a competitive market (where supply meets demand), the higher P and lower Q charged by a monopoly because there is no competition, and the lower supply cost at that lower Q.

A sales (or excise) tax on a good also causes a "deadweight loss" even when there is no monopoly, because the tax has the effect of increasing the price and reducing the output. '''''In the case of an excise tax, the "deadweight loss" is both the lost decrease in consumer surplus and the lost decrease in producer surplus.''''' due to the lower output and higher price. Revising Revisit the graph in Lecture 7 to see a graphical display of these two surpluses.

There are several important differences between a monopoly Now that we have learned about perfect competition, at one extreme, and competitive industrythe monopoly, at the other extreme, let's contrast the two. The biggest difference is that consumers obtain goods at cheaper prices when there is competition than when there is a monopoly. Competitive companies will produce goods at their minimum average total cost in the long run. Monopolies usually do not.

Quality may also be better in a competitive industry. Microsoft Windows is not only expensive, but many think it is not as good as a competitive operating system would be. For example, it frequently “hangs” such that people have takes a long time to reboot "boot up" and it sometimes "hangs", requiring users to turn off their computers(and lose their work-in-progress) in order to reboot. That annoyance is neither These annoyances are not efficient nor competitive, and reflect poor quality.

Another difference between a monopoly and perfect competition is that an increase in demand does not necessarily cause a monopoly to supply more. In contrast, in a competitive industry, an increase in demand always forces an increase in supply (greater Q).

You would want In reality, there is almost never perfect competition in the markets from which you buy your inputs, including your supply materials and your laborcomplete monopolies are also rare. That way you could keep your costs down. But you would want The business world is typically somewhere between perfect competition and a monopoly for your company in , depending on the market in which you sell your good or service. That way you could charge Some markets are more and make higher profitscompetitive than others. Some companies enjoy more of a monopoly than others.

In reality, there is almost never perfect competition. Complete monopolies are also rare. The business world is typically somewhere between perfect competition ==What Is Between a Monopoly and a monopoly, depending on the market. Some markets are more competitive than others. Some companies enjoy more of a monopoly than others.Perfect Competition?==

This lecture is devoted to all those situations in between perfect competition and true monopoly. The spectrum of different types of markets looks like this:

# Monopoly (MC=MR is how the price is determined)

# Perfect Competition (P=ATC, average total cost, is how price is determined)

As a sellerFor all of the above, you make more money the selling price P is determined by when MC=MR, but the higher you are on in the list, the higher that price P will be. As a buyerThe lowest P occurs for perfect competition, you save more money the lower you are the listfor which P=ATC.  Let’s introduce review each termtype of market next:

'''''A monopoly is a single seller of a product having no competition or close substitutes'''''. The seller comprises the entire industry. A related concept is the “monopsony”, which is a “buyer’s monopoly.” It consists of a single buyer of a good or service. In a one-company isolated town, where one company employs most of the people, the company is nearly a monopsony with respect to labor in that town. Notice that the more it hires, the greater its wage costs will become. But perfect monopsonies are difficult to imagine. Can you think of another one?

'''''A cartel is a group of producers that band together to raise who agree on fixing prices, restrict restricting output, or allocate allocating market share'''''. OPEC, a group of mostly Arab oil producers attempting to keep profits high, is the most famous cartel. Cartels are illegal in the United States; they are prohibited here by American antitrust law.

A '''''An oligopoly is a few producers that who dominate a market without fixing prices or output'''''. If the good is identical among the companies, then it is a perfect or pure oligopoly. Examples include the steel and cement industries. Cement is cement, period. If the good is not identical, then it is an imperfect oligopoly. Examples are the car or soap industries. Cars are not identical to each other, but the auto industry is an (imperfect) oligopoly.

This has more sellers than an oligopoly and more competition too. But companies are able to increase their prices without losing all their customers. Why? Because '''''in monopolistic competition there are “differentiated products.” ''''' An example is the haircutting or hairdressing industry. Cutting hair is a service that is not a perfect substitute for other haircutting services. One with a loyal customer base can increase her prices without losing all her businesscustomers.

This is where '''''there is no barrier to entry into the market and no start-up costs'''''. There are only a few sellers, or maybe only one seller, but competition is always threatened. A newspaper vendor in a shopping mall is an example. He may be the only one, but he does not have an monopoly because it is so easy for another competitor to start selling newspapers that he . This "perfect" threat of competition forces him always keeps to keep his prices as low as he can.

A large number of sellers and buyers have full knowledge and perfect mobility of resources. The good or service is homogeneous. Competition is ruthless in keeping prices down. '''''Price (P) equals Marginal Cost (MC) equals Average Total Cost (ATC)'''''. This is what happens when Wal-Mart moves in next door! There are other terms worth knowing in this area. “Monopsony” is a “buyer’s monopoly.” It consists of a single buyer of a good or service. In a one-company isolated town, where one company employs most of the people, the company is nearly a monopsony with respect to labor in that town. Note that the more it hires, the greater its wage costs will become. But perfect monopsonies are difficult to imagine. Can you think of another one?

There are only a few firms in Memorize these '''''three conditions for an oligopoly. There are also market: (1) few companies, (2) high barriers to entry so that new companies cannot enter the industry , and compete with existing firms. Each firm produces (3) similar productsgoods'''''.

Memorize the conditionsThe car industry is a good example: (1) few companiesGeneral Motors, (2) high barriers to entryFord, Toyota, and (3) similar goodsa handful of others. All the car companies in the world could be listed on one sheet of paper. So this satisfies the first condition: few companies.

The car industry is Is there a good example. high barrier to entry? General Motors, Ford, Toyota, Daimler-Chrysler, and so onYes. All the It is not easy or cheap to start a new car companies in the world could be listed on one sheet of papercompany. There are only two has not been a new American-owned car companies: GM company in decades. John DeLorean was the last one to try, and Fordhis effort went bankrupt. So this satisfies the first condition: few companiestwo is satisfied.

Is there a high barrier to entry? Yes. It is not easy or cheap to start a new car company. I have not heard of new American car company being started in the last ten or fifteen years. John DeLorean was the last one to try, and his effort went bankrupt. So condition two is satisfied. Are cars similar goods? Yes again. There are differences, of course, but they all have four wheels, an engine, and run on gas(or sometimes an electric rechargeable battery). They take you from point A to point B. When you need to drive somewhere, you usually do not care what type of car is available. Any one will typically do. So condition three is satisfied.

In some ways oligopolies are Oligopolies, like monopolies, and in other ways they are notcan charge higher prices than when there is perfect competition. Oligopolies are like monopolies in that the The high barriers barrier of entry keeps new competitors out. With less competition, it becomes possible to earn greater profitsincrease prices and reduce output. Both oligopolies and monopolies can do this. But note that both there are constrained by limits: the downward-sloping demand curveLaw of Demand still applies to every type of firm.

The major difference between the oligopolies and the monopolies are that there is at least some competition in an oligopoly. Ford could cut prices on its cars to attract customers from GMToyota. The pricing decisions of one company in oligopoly shift the demand curve for the other companies. When Ford raises its prices, for example, this causes the demand curve to shift upward for GM, to its benefit.

There are several two models for what the demand curve looks like for an oligopoly. One famous model is the “kinked” demand curve. In this scenario, if one firm raises its price then the other firms do not have to imitate it. The firm that raises its price sees a sharp falloff in demand. Its demand curve has a lower slope (e.g., more like a horizontal line) than the demand curve for the industry. The change in slope causes the “kink” in the curve. However, if a firm lowers its price, then the other firms must lower their price also to keep their customers.

The other model for an oligopoly is when there is a dominant firm that sets the price for the entire industry as the “price leader.” There can be many smaller firms or companies, but they follow the pricing of the dominant firm. If they don’t, then the powerful firm can punish “punish” them with price-cutting. If the demand is relatively inelastic, then the dominant firm sets a high and profitable price. The smaller companies must follow it in order to avoid being punished “punished” for underselling it.

==Cartel=Game Theory and the Nash Equilibrium===

A cartel takes an oligopoly one step further. In a cartel"Game theory" is the serious study of strategy used in game-like situations, the companies have an actual agreement among such as multiple participants competing against each other to raise prices, reduce supply, or otherwise reduce competitionin some way. This is illegal. Agreements One insight by companies the mathematician John Nash about game theory applies to reduce competition are prohibited by federal lawoligopolies, and it won him the Nobel prize in Economics. The federal government can prosecute and convict anyone who agrees or conspires to reduce competitionHollywood, in a rare moment of excellence, made a fine movie about him called “A Beautiful Mind,” which won an Academy Award.

Even if His insight is called the federal government does not get involved[[Nash equilibrium]], private individuals or companies can sue to recover damages that result from agreements to limit competition. The penalties are harsh: they include treble (triple) damages plus which predicts an award "equilibrium" set of all pricing decisions by firms, where the attorneys fees of any plaintiff who proves market "settles down" to a restraint of competition or trade. These laws are called the antitrust laws, passed in the late 1800s and famously enforced by President Teddy Roosevelt in the early 1900sstable price.

So if it is illegal'''''The Nash equilibrium occurs when no firm can improve its position by changing its decision, assuming the other firms' decisions remain unchanged.''''' If a firm can improve its position, then why study it? First of alldoes so, important producers in foreign countries ignore our laws. The biggest and most dangerous cartel is the “Organization of Petroleum Exporting Countries,” or “OPEC”then check again to see if another firm can improve its position. Check them out Keep doing this until no firm can improve its position on its own, and then you've found the internet at http://www.opec.org equilibrium (the Nash equilibrium). It has eleven member countries: AlgeriaGroup decisions are prohibited, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. The website includes many facts about those countries and their oil productionjust as oligopolies are prohibited by law from making decisions together.

You may be wondering why we care what these foreign countries do with their oil production. The problem is that they control a substantial percentage A famous application of the production of oil Nash equilibrium is the "prisoner's dilemma," whereby two partners in crime are interrogated in separate rooms. In this "game" the worldbest individual result is obtained by one criminal if he confesses but his partner does not, and the second best result is if neither confesses. When they agree to raise prices or reduce outputBut if neither confess then one criminal can improve his outcome by confessing and testifying against his partner, it directly affects and then the price of gasoline in Americaother criminal can improve his result by also confessing. Some have suggested The Nash equilibrium predicts that the federal government should use antitrust laws and sue this cartel due outcome moves to its impact on American consumersan "equilibrium" of both confessing.

In a cartel, there are (1) relatively few companies, (2) high barriers Microeconomics exams usually have at least one question about the Nash equilibrium. Trial-and-error using the above bolded rule helps to entrysolve it, and then check your answer by switching the rivals in the game (3or firms in the market) price and output determined by agreement so that all companies act alike. But isn’t that similar to a monopolyThe outcome should be the same no matter how you interchange the rivals, with and '''''at the only change being a few companies acting as though they are equilibrium no one?acting alone should be able to improve his reward by changing his decision'''''.

There is one key difference'''''Example''''': in a cartel, there is an incentive for each company to cheattwo gas stations at the same intersection. Iran can agree to The Nash equilibrium for the price and output of the OPEC cartelprices charged will not be higher than marginal cost, because if it were, but then secretly sell more oil at a slightly reduced one of the two gas stations would lower its price slightly in order to maximize its profitsattract customers from the other gas station. Other ways But then the other gas station would also lower its price to maximize profits in a cartel include offering rebates or providing additional services or higher qualityavoid losing its customers. This maximizes Eventually the profits of the cheating companyprice for both stations would become equal to their marginal cost, and reduces the neither gas station would be able to improve its profits of other members of the cartelby changing its price.

A cartel is an ''illegal'' oligopoly whereby the firms agree with each other to "fix" or increase prices. '''''In a sense this has even happened to OPECcartel, the most powerful cartel of all. That cartel was able companies have an actual agreement with each other to cause a fourfold increase in oil raise prices after we helped Israel in the Yom Kippur War, reduce supply, and otherwise reduce competition. There were enormous lines at gas stations This is illegal in 1973 due to the oil crisisUnited States. ''''' Your parents would remember it. It was known as But foreign countries -- the 1973 Energy Crisis. In some areas oil producing nations of the United StatesAlgeria, drivers of cars with odd-numbered license plates were only allowed to purchase gas on MondayIndonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Wednesday and FridayQatar, while evenSaudi Arabia, United Arab Emirates and Venezuela -numbered plates were assigned to Tuesday- formed a big cartel known as “Organization of Petroleum Exporting Countries, Thursday and Saturday” or “OPEC”. People were prohibited from buying less than certain amounts at gas stations to prevent hoarding and try to reduce lines. But what would be the real cause of any shortage?

Think back on what On the CLEP exam you have learned earlier in the course. need know only this: There is one major cause of shortages, a cartel causes higher prices and it is not the invisible handless quantity than competition. It A cartel is government price controls. In 1973, nearly as bad for the government imposed certain price controls on gaspublic as a monopoly, and that caused except in a cartel some of the shortages companies may "cheat" and inefficiently long lines sell more output at gas stationsa lower price than the fixed, agreed-upon price.

Milton Friedman would say '''''In a cartel, there are (1) relatively few companies, (2) high barriers to entry, and (3) a higher price and lower output determined by agreement so that all companies act alike''''' (except for some cheating that may occur by some of the companies).  Conservative economists predict that eventually the invisible hand does , and competition, will prevail. A famous American economist, the late Milton Friedman, predicted that even OPEC does not still have so would eventually fail. Indeed, OPEC has lost much of its former power over to control oil prices today, and it faces competition from Russia, Mexico, the United States, Canada, and other non-OPEC nations.

Each company asks acts like a mini-monopoly over its loyal customer base, and it also competes against the other mini-monopolies.

Can you think of other examplesof monopolistic competition? Perhaps CDs by popular singers, or books by popular authors? ==Nash Equilibrium== <use material from entry here>Here is the insight that won John Nash a Nobel prize in economics and led to a popular, Academy-Award winning movie called “A Beautiful Mind.” This is called the [[Nash equilibrium]]. It applies in particular to oligopolies. When you have a small number of sellers, as in an oligopoly, the Nash equilibrium occurs when no seller can benefit by changing his price while the other sellers keep their prices unchanged. The most famous example of the Nash equilibrium is the “Prisoner's dilemma,” where two accused persons are separated and interrogated. If neither confess, then no crime is proven and they must be released. If both confess, then they receive harsh sentences. If one confesses and the other does not, then the confessor is released but the other receives even harsher punishment. The Nash equilibrium predicts both will confess, which is not their overall optimal result.

Read and, if necessary, reread the above lecture.  1. An oligopoly that illegally agrees to raise its prices Homework is called a __________. 2. List three industries that are oligopolies and explain why. 3. As an industry becomes more competitive, what happens to price (P) compared to marginal cost (MC)? Explain. 4. Suppose Daniel’s company sells goods in an industry having a demand curve with lighter this set of Qs and Ps: (1,30), (2, 28), (3, 26), (4, 24), (5, 14), (6,8), (7,2). What type of industry is this, and what type of demand curve is this? If marginal cost equals $20 (MC=20), then what are the output and price in this industry? 5. Suppose you saw three different advertisements in three different industries: (1) “The lowest price in town is at Zack’s!”, (2) “Buy more channels from your cable service provider!”, and (3) Matt is the smartest surveyer in town ... call him week to survey your property!” What type of industry would each ad likely represent? 6. What kind of industries are these: (1) one cleaners in town that sends the clothes out to be cleaned, (2) three car mechanics in town with hydraulic lifts and expensive electronic equipment, and (3) many apparel stores with distinctive fashions? Will consumers obtain the best prices? 7. Suppose two students separately own the only widget companies in the entire world. They sell at the same price and have no plans to change that. But they might advertise. If both advertise, then they lose profits due to the advertising expenses. If neither advertises, then they make the largest profit by reducing expenses. But if one advertises and the other does not, then the one that advertised makes phenomenal profits. What happens? 1. A monopoly can be extraordinarily profitable because there is no __________. 2. Provide three specific examples of monopolies and describe briefly what they do. 3. Given an example of how give you lose time, money, or efficiency due to a specific monopolybreak after the exam last week.

Answer 4. “Monopolies may be bad, but government regulations out of monopolies are even worse!” Do you agree? Explain.these 5 questions:

51. List ways Identify an industry not mentioned in the lecture that monopolies can be establishedis an oligopoly, and explain why.

62. Suppose Katie likes Order the types of industries from those having the lowest price (due to paint for money or even for free, but will not pay extra the greatest competition) to paint. Suppose also that those having the monthly demand for her paintings is P = $500 - 50Qhighest price (due to the least competition). How many paintings does she create each month? 7. List some differences between a monopoly and a competitive industry.

83. Suppose Anthony owns a company having marginal costs Explain which specific type of $5 for all his unitsindustry (e.g. If he sells only one, then he reaps $11; selling two fetches a price oligopoly or something else) each of $10 piecethese quotes probably refers to: (1) "She's the finest hair stylist in town; selling 3 attains a price of $9; selling four reaps $8; Q=5 would have P=$7; Q=6 no one has P=$6her special style!", etc(2) "Crazy Eddie . A competitive firm would have the same cost and demand numbers. What does Anthony sell at. his low prices are INSANE!", and what is the social cost of (3) "Don't like his monopolyprices? He's the only one in town selling what you need."

94. Estimates are not very accurate about homeschooling, but some guess that 1 out of every 25 students is homeschooled. At what level or fraction would homeschooling end the public school monopoly? DiscussList how monopolies can be established.

105. Suppose you live in What prevents a valley where water flows freely and abundantly monopoly from a spring. increasing its prices without limitation? Suppose your entire family uses on average 80 gallons a dayExplain. But then a company bought the spring. If the demand curve is a straight line from P=$100, Q=0 to P=$0, Q=80, at what price and quantity would the company sell water?

New Answer question 6, and then 2 out of the subsequent 3 questions:

16. Identify something that a firm in monopolistic competition Where is unable the Nash equilibrium for this set of options, where (x,y) represents the profits to do(Firm A, Firm B)? Explain.<br><br><div style=float:left; padding: 20px">{|style="border-collapse:collapse"|-|||style="border-style:solid; border-width:1px; padding:10px"|Firm A Does Not Reduce Output|style="border-style:solid; border-width:1px; padding:10px"|Firm A Reduces Output|-!rowspan=2 style="padding:10px"||style="border-style:solid; border-width:1px; padding:10px"|Firm B Does Not Reduce Output|style="border-style:solid; border-width:1px; padding:10px"|(50,50)|style="border-style:solid; border-width:1px; padding:10px"|(25,100)|-|style="border-style:solid; border-width:1px; padding:10px"|Firm B Reduces Output|style="border-style:solid; border-width:1px; padding:10px"|(100,25)|style="border-style:solid; border-width:1px; padding:10px"|(75,75)|}</div>{{clear}}

27. Monopolies: should the government regulate them? How does a monopolist maximize his profitsOr is regulation worse?

3. Nash Equilibrium question, with grid of choices and options9.How does a monopolist maximize his profits?