 Only seller of a product ….  With out close substitutes  Price Maker  Market power alters the relationship b/w a firm’s price and its costs  Perfect competition: P = ….  MC  Monopoly: P and MC? ….  P>MC  Monopoly charge ANY price or earn ANY profit? …  Confined by the D curve  Govt. can sometimes improve market outcomes

1. Key Resource define / give ex 2. Govt. Created …why?  Personal/political reasons  Best interest of society (promote efficiency, innovation)  How does the government create a monopoly?  Patent=20yrs  Copyright

3. Natural- define and give ex…. Utilities (gas, electric, cable) Ex: public goods and common resources -bridge p. 319 Most unattractive to try to enter Over time: with new technology/alternatives/changes in market conditions: All monopolies may give way to a Competitive Market

 Perfect Competition: P and MR? …  P=MR  Monopoly: P and MR? …..  MR < P (except first unit) b/c ….  downward sloping D curve (in order to sell 1 more, must lower price).  So when sell one more, lower P = lower revenue on all units prior (since P=AR and D curve = AR)  Perfect competition: P : MR : D relation?...  P=MR=D  Monopoly: P:MR:D relation? …..  (P>MR….so MR always < D curve)

 P.322: output effect on TR  Sell one more and TR goes up  as %change Q increases at greater rate than % change P decreases…..= Elastic  Price effect on TR  as as %change Q increases at lesser rate than % change P decreases…..= Inelastic  (competitive firm has no price effect)

 P = MR = MC vs. P > MR = MC Compare Supply Curve : Perfect Competition vs. Monopoly  A MONOPOLY DOES NOT HAVE A SUPPLY CURVE  A supply curve tells us the Q that firms choose to supply at any given price  Does NOT apply to Monopoly b/c = Price Maker  Compare Profit (formula on graph)  Perfect Competition and Monopoly Profit = P-ATC x Q  Case Study  Monopoly Drugs v. Generic Drugs  20 year patent vs. patent expires

 Perfect Competition S=D (P=MC) = Allocative Efficiency  Monopoly : No supply curve; P> MR=MC  Compare Production: Perf Comp vs. Monopoly  Which market structure produces more?  Monopoly: Produce less than allocatively efficient  = not socially efficient  Fail to maximize……  economic welfare …so creates…..  Deadweight loss