ECON 1000 Lecture Notes - Lecture 13: Monopoly Price, Marginal Revenue, Natural Monopoly
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Monopoly is a market: produces good or service with no close substitute exists, one supplier is protected from competition by a barrier preventing the entry of new firms. If there is a close substitute, then the firm faces competition from producers of the substitute: monopoly sells a good that has no close substitutes. Barriers to entry: constraint that protects a firm from potential competitors, 3 types of barriers. 10% unit: economies of scale is always achieved, lrac is sloping downward when it meets the demand curve. Ownership barriers to entry: occurs if one firm owns a significant portion of a key resource. Legal barriers to entry: creates legal monopoly, competition and entry are restricted by the granting of a, public franchise, government license, patent or copyright. Monopoly price-setting strategies: single-price monopoly: must sell each unit of its output for the same price to all its customers, price discrimination: selling different units of a good or service for different prices.