Finals: Monopoly

• 3 High Barriers to entry

  1. Legal barriers
  2. Economies of Scale
  3. Exclusive ownership of a scarce resource
• 3 legal bariers

  1. public franchise
  2. patents
  3. government licenses
• if economies of scale are so pronounced in an industry that only one firm can survive in the industry (ex. Public utilities that provide gas, water, electricity, and local telephone service

  natural monopoly
• these are granted to inventors or a product or process for a period of 20 years, no one else can legally produce and sell their product or process

  patents
• is a right granted to a firm by government that permits the firm to provide a particular good or service and excludes all others from doing the same (thus eliminating potential competition by law.

  public franchise
• refer to monopolies that are legally protected from competition.

  government monopoly
• refer to monopolies that are not legally protected from competition

  market monopoly
• does a monopolist a price searcher?

  yes
• what do you call if a seller that has the ability to control to some degree the price of the product it sells.

  price searcher
• true or false: in a monopoly, the monopoly firm is the same with the industry

  true
• what is the formula or getting the MR of monopoly

  RG-RL
• actions of individuals and groups who spend resources to influence public policy in the hope of redistributing (transferring) income to themselves from others

  rent seeking
• is payment in excess of opportunity cost

  economic or monopoly rent
• this occurs when the seller charges different prices for the product it sells, and the price differences do not reflect cost differences

  price discrimination
• this occurs when the seller charges a uniform price per unit for one specific quantity, a lower price for an additional quantity and so on

  second degree discrimination
• this occurs when the seller charges the highest price each consumer would be willing to pay for the product rather than go without it.

  perfect price discrimination
• Perfect Price Discrimination is sometimes called

  discrimination among units
• Second-Degree Price Discrimination also called

  discrimination among quantities
• Third-Degree Price Discrimination also called

  discrimination among buyers
• this occurs when the seller charges different prices in different markets, or charges different price to different segments of the buying population

  third degree
• Conditions of Price Discrimination

  1. price searcher
  2. distinguish who is willing to pay at different prices
  3. non-existence of arbitage
• “buying low and selling high”

  arbitage