MGCR 293 Lecture Notes - Lecture 8: Monopolistic Competition, Brand Loyalty, Market Power
1 Dec 2017
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Mgcr 293 chapter 8: monopoly & monopolistic competition. Market power is the ability to influence the market, and in particular the market price, by adjusting the total quantity offered for sale. A monopoly is an industry that produces a good or service for which no close substitute exists and in which there is one supplier that is protected from competition by a barrier preventing the entry of new firms. Natural monopoly exists when the technology for producing a good or service enables one firm to meet the entire market demand at a lower price than two or more firms could. Example: one electric power distributor can meet the market demand for electricity at a lower cost than two or more firms could. 1. the firm estimates the cost per unit of output of the product. 2. the firm adds a markup to the estimated average cost. Pricing in some firms is based on a target return figure that they hope to earn:
