Marc Schwartzberg Mr. Gill AP. Micro 14, January 2011

Slides:



Advertisements
Similar presentations
Top 10 Most Common Errors AP Economics
Advertisements

Monopolistic Competition
Profit maximization.
Practice Free Response Questions
Monopolistic Competition
Act. 28 Answers Fig OUTPUT TVC TC MC ATC AVC $0 $ $4
Monopolistic Competition
Roger LeRoy Miller © 2012 Pearson Addison-Wesley. All rights reserved. Economics Today, Sixteenth Edition Chapter 24: Monopoly.
Monopolistic Competition
14 Perfect Competition CHAPTER Notes and teaching tips: 4, 7, 8, 9, 25, 26, 27, and 28. To view a full-screen figure during a class, click the red “expand”
Monopolistic competition Is Starbuck’s coffee really different from any other?
Chapter 9 – Profit maximization
Monopolistic Competiton. Assumptions Many sellers and many buyers Slightly different products Easy entry and exit (low barriers)
Departures from perfect competition
Monopoly KW Chap. 14. Market Power Market power is the ability of a firm to affect the market price of a good to their advantage. In declining order.
C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to Describe and identify monopolistic competition.
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Monopoly u A monopoly is the sole seller of its product.  its product does not.
Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets Copyright © 2014 McGraw-Hill Education. All rights reserved.
Monopolistic Competition, Price Discrimination
Types of Market Structure
Monopolistic Competition
John R. Swinton, Ph.D. Center for Economic Education Georgia College & State University.
Chapter 9 Practice Quiz Monopoly
Mr. Weiss APE/Honors Economics – Test Study Questions – Micro – Unit APE/Honors Economics – Test Study Questions – Micro – Unit 3 3. Which of the following.
AP Economics October 21, Finish Unit II Exam Review 2.Begin Unit 3: Theory of the Firm 3.Lesson 3-1: Introduction to Market Structures w/Video 4.Return.
Perfect Competition *MADE BY RACHEL STAND* :). I. Perfect Competition: A Model A. Basic Definitions 1. Perfect Competition: a model of the market based.
1 Monopoly and Antitrust Policy Chapter IMPERFECT COMPETITION AND MARKET POWER imperfectly competitive industry An industry in which single firms.
Chpt 12: Perfect Competition 1. Quick Reference to Basic Market Structures Market StructureSeller Entry Barriers# of SellersBuyer Entry Barriers# Buyers.
When you have completed your study of this chapter, you will be able to C H A P T E R C H E C K L I S T Explain how price and quantity are determined.
Top 10 Most Common Errors AP Economics Overview of Trouble Spots 10. Monopolistic Competition and Economies of Scale 9. A Tax Reduces Allocative.
Monopoly. A firm that is the sole seller of a product No close substitutes Many barriers to entry Sources of market power: – Firm owns a key resource.
Copyright © 2006 Pearson Education Canada Monopoly 13 CHAPTER.
Price Discrimination Price discrimination exist when sales of identical goods or services are transacted at different prices from the same provider Example.
Monopoly Quiz Recap.
Perfect Competition By Kayleigh Verney.
Imperfectly Competitive Markets Monopolistic Competition Oligopoly.
Perfect Competition Overheads. Market Structure Market structure refers to all characteristics of a market that influence the behavior of buyers and sellers,
OUTLINE Perfect Competition Monopoly Monopolistic Competition
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 7: Monopoly, Oligopoly, and Monopolistic Competition.
Monopolistic Competition CHAPTER 16 C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Describe.
Review pages Explain what it means to say that the monopolist is a “price maker.” 2. Explain the relationship between output and price for.
MONOPOLY. CHARACTERISTICS  One seller of a good or service  Completely differentiated good  No close substitutes for the good  Barriers to entry 
Perfect Competition CHAPTER 11 C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Explain a perfectly.
And Unit 3 – Theory of the Firm. 1. single seller in the market. 2. a price searcher -- ability to set price 3. significant barriers to entry 4. possibility.
Monopolistic Competition CHAPTER 16 C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Describe.
Firms in Markets.
Perfect Competition Overheads. Market Structure Market structure refers to all characteristics of a market that influence the behavior of buyers and sellers,
AP Economics Mr. Bernstein Module 61: Introduction to Monopoly November 2015.
Chapter Monopoly 15. In economic terms, why are monopolies bad? Explain. 2.
Chapter: 14 >> Krugman/Wells Economics ©2009  Worth Publishers Monopoly.
Monopoly 1. Why Monopolies Arise Monopoly –Firm that is the sole seller of a product without close substitutes –Price maker Barriers to entry –Monopoly.
Review 1.Identify the 4 market structures. 2.Identify the 3 types of market. 3.Identify 4 types of monopoly. 4.Explain why D is greater than MR in monopoly.
16 Monopolistic Competition CHAPTER. 16 Monopolistic Competition CHAPTER.
Unit 4: Imperfect Competition
CHAPTER 14 Monopoly.
©2002 South-Western College Publishing
Firms in a Competitive Market
Monopolistic Competition
Mod 62: Monopoly & Public Policy
Module 67: Introduction to Monopolisitic Competition
Monopolistic Competition
AP Microeconomics 2004 Question 3.
© 2007 Thomson South-Western
Perfect Competition A2 Economics.
Chapter 8 Market Structure: Perfect Competition, Monopoly , Oligopoly and Monopolistic Competition PowerPoint Slides by Robert F. Brooker Harcourt, Inc.
Managerial Decisions for Firms with Market Power
Profit maximization.
AP Microeconomics 2004 Question 3.
Econ 100 Lecture 4.2 Perfect Competition.
Perfect Competition Econ 100 Lecture 5.4 Perfect Competition
Presentation transcript:

Marc Schwartzberg Mr. Gill AP. Micro 14, January 2011 Monopolies Marc Schwartzberg Mr. Gill AP. Micro 14, January 2011

Key concepts Monopolistic competition: A market structure in which there are many competing firms in an industry, each firm sells a differentiated product, and there is free entry and exit into the firm in the long run. Monopolist: A firm that is the only producer of a good that has no close substitutes Natural Monopoly: An monopoly that exists when increasing returns to scale provide a large cost advantage to having all output produced by a single firm Local monopoly: A monopoly limited to a specific geographical area Monopoly: An industry controlled by a monopolist Monopsony: A market in which there is only one buyer. Price discrimination:The business practice of selling the same good at different prices to different consumers State monopoly: A monopoly that is owned and managed by a government - also known as a nationalized industry

Graphs Monopolist maximizes profit by producing the level of output at which MR=MC.

Formulas MR=MC at the monopolists profit maximizing quantity of output. P=MC at the perfectly competitive firms profit maximizing quantity of output. P>MR=MC at the monopolist profit maximizing quantity of output.

Monopoly and Oligopoly These systems are both large and dominating in the economic system. The main difference between the two is a monopoly contains one seller, while an oligopoly contains two or more. Also a monopoly has no substitute and an oligopoly has few substitutes.

Monopoly and Perfect competition Compared to a perfectly competitive market, a monopoly is the only producer of a product. Perfect competition is a monopolies opposite.There are many sellers and similar products, with many substitutes. There are few barriers of entry and exit.

2009 AP micro exam 1. CableNow is the only supplier of cable TV services offering a wide range of TV channels. CableNow is an unregulated firm and is currently earning an economic profit. Assume that CableNow does not practice price discrimination. (a) Draw a correctly labeled graph for CableNow and show each of the following. Make sure your graph is large enough to be legible. (i) The profit-maximizing quantity of cable services, labeled as Q* (ii) The profit-maximizing price, labeled as P* (iii) The area of economic profit, completely shaded (iv) The socially optimal level of cable services, assuming no externalities, labeled as QS (b) Assume that the government grants CableNow a lump-sum subsidy of $1 million. Will this policy change CableNow’s profit-maximizing quantity of cable services? Explain. (c) Instead of granting a subsidy, assume now that the government chooses to require CableNow to produce the quantity at which CableNow earns zero economic profit. On the graph you drew in part (a), label this quantity QR. (d) At QR, is the firm’s accounting profit positive, negative, or zero? Explain. (e) Assume that a new study reveals there are external benefits associated with watching TV. Will the socially optimal quantity of cable services now be larger than, smaller than, or equal to the QS you identified in part(a)(iv) ?

2009 Answers Question 1(a) 5points: ・One point is earned for a correctly labeled graph for CableNow, with a downward-sloping demand curve and with the marginal revenue curve below the demand curve. ・One point is earned for identifying the profit-maximizing quantity of cable services, Q*, at MC = MR. ・One point is earned for identifying the profit-maximizing price of cable services, P*, on the demand curve above Q*. ・One point is earned for showing the area of economic profit, completely shaded. ・One point is earned for identifying the socially optimal level of cable services, QS, where the MC curve intersects the demand curve.-(The graph should appear as I does because CableNow is earning a profit) (b) 2 points: ・One point is earned for stating that the lump-sum subsidy will have no impact on the quantity of services CableNow produces. (This is because CableNow is a monopoly) ・One point is earned for explaining that the lump-sum subsidy will not affect MC. (c)1 point: ・One point is earned for identifying the quantity of cable services, QR, where the ATC curve intersects the demand curve. (d) 2 points: ・One point is earned for stating that accounting profit is positive. ・One point is earned for explaining that accounting profit excludes implicit costs. (e) 1 point: ・One point is earned for stating that the socially optimal quantity will be larger than QS.

Multiple choice A monopoly has a) A lot of competition b) A perfectly elastic demand curve c) A downward slopping demand curve d) No market power e) No ability to sustain Lon run economic power A monopoly would always be earning a profit if a) Its price were greater then its marginal cost b) Its price were less then its marginal cost c)Its demand increased d) Its price were greater than its average total cost In order to be productively efficient, a profit earning monopoly would have to a) Increase its output b) Decrease it output c) Keep its output constant d) Increase its price

Multiple Choice Answers C- look at the graph on the 3rd slide A- To be productively efficient you need to produce the most output from the least input D- If there price is greater then average total cost then when they sell their item they are making a profit

Real Life Links http://www.econedlink.org/lessons/index.php?lid=628&type=educator http://www.sjsu.edu/faculty/watkins/ironsalt.htm

Rap My concept is monopoly often confused with oligopoly but those be people just thinking sloppily they need two heads like a duopoly. Cause a monopoly is when one has complete control. When given a public opinion poll most say it’s a business of a dead soul, sorry to get on that theatrical role. But most say it ruins the public economy, And that most achieve a level of autonomy. There mind set is a perfect competition wanna be. Monopolies set out to maximize profit, continuously people stand with picket signs that say stop it. They don’t want places like Wal-Mart in their town, but Wal-Mart laughs and refuses to back down, they acknowledge it as back round sound.