ECON1131 Study Guide - Mira-Bhayandar Municipal Corporation
Document Summary
Pure monopoly characteristics: single seller, no close substitutes, price maker (cid:224) firm controls total quantity supplied which gives them considerable control over price, blocked entry (cid:224) barriers may be economic, legal, technological, etc, nonprice competition (cid:224) product may be standardized (pr advertising) or differentiated (advertise product"s attributes) (cid:224) rare, sometimes government owned/ regulated public utilities. Common misconceptions of monopolies: not highest price (cid:224) to maximize profits they produce where mr = mc and set the accepted price at that output (according to the demand curve, total, not unit, profit (cid:224) monopolist seeks maximum total (not unit) profit, possibility of losses (cid:224) although likelihood of economic profit is greater for monopolist than pure competitor, profit is not guaranteed. Monopoly has inferior results to pure competition: (given identical costs: higher price, smaller output, less efficient allocation of resources, why? (cid:224) rooted in entry barriers.
