econ ch 8-13 study

where is MR elastic/inelastic in monopoly

elastic before 0, inelastic after 0

in which in/elastic range do we want to produce for monopoly

elastic

which types of markets have supply curves, and are prod/alloc eff

PC: has supply curve, is PE, is AE

price discriminating monopoly: PE and AE

other 3: no supply curve, not PE, not AE

DWL for monopoly

between where MR=MC, D=MC, and D at Qf

three conditions for price discrimination

1. monopoly has power

2. able to segregate into groups

3. no resale

six characteristics of PC

1. large # of firms

2. standardized product

3. no ads

4. no barriers to entry/exit

5. price taker

6. constant cost industry

what is a natural monpoly

the monopoly happened naturally, like it is just the most efficient way and only way to do things, such as there being limited ability to put cables underground. as opposed to artificial monopolies, which block entry by buying out the market

PS, CS, DWL for monopolies

• DWL is the same as PC, where its MC/MR, D at that point, and MC/D

• PS is below price but above MC

• CS is above price

PS, CS, DWL for price discriminators

• no DWL or CS

• everything PS

what changes between monopoly graph to price discriminating graph

D equals MR now

fair return regulation + effects

produce where D intersects ATC (not min), firm will earn 0 econ profits

socially optimal regulation + effects

produce where D = MC, firm will need subsidies

excess capacity

in MC, the difference in Q between min ATC output and current output

LR situation for Monop Comp

0 econ profits

how is LR equilibrium achieved for Monop Comp

1. if the firm is making a profit, other firms will enter

2. the demand of each firm shifts down because now there is other firms to choose from and there are now more substitutes

3. demand keeps shifting down until it is tangent to ATC at minimum ATC point

counterargument to monop comp not being efficient in any way

it gives the people product variety so now they are able to choose what they like best (efficiency?) and also ads make everything more complex

kinked demand curve

demand has a cusp so MR has a jump discontinuity and MC goes right through

criticisms of kinked demand curve

1. it doesn’t show how price got there in the first place

2. when the economy is unstable, people fluctuate prices a lot more than graph suggests

pos/neg effects to advertising for oligopoly

people lie in ads but also consumers know more abt options

obstacles to collusion

• demand/cost differences

• cheating

• number of firms

• recession

• they’d have to block all entry

• its illegal in US

limit pricing

putting price low enough to block firms from entering industry

4 concentration ratio shortcomings

1. cr applies to nation but some markets are local

2. doesn’t take into account interindustry competition with different products

3. overstated because doesn’t use import competition

4. first 4 first could be even or rlly uneven in market shares so could be a monopoly basically

what kind of products are in oligopoly

can be standardized or unique

rent seeking behavior

trying to get more money through laws

x inefficiency

laziness or hiring ur nephew

network inefficiency

people want the product that is able to be used with other products

what do monopolists use instead of ads

foreign relations advertising