Transcript 2004 – 2005 Camel Bunan Tong Memorial Secondary School

2004 – 2005
Camel Bunnan Tong Memorial Secondary
School
A monopolist is a seller who faces a
downward sloping demand for his
products.There is no close substitutes for
the product.
• Market is closed
• Unique Product
• Information-transaction cost
In a closed market with only one seller, he can
keep the output low and the price high without
fearing that he will lose all the sales.That is
called closed-market price searchers.
e.g.Western Cross Harbour Tunnel
• A seller may also be a price-searcher even if there
are no entry barriers.This is called open-market
price searchers.
e.g.CLP Power(electricity supply)
Licensing, Public Franchise and
Government Ownership
-Trademarks
-Copyrights and Patents
-Trade Secrets
-Homogeneous Products
In downward sloping demand curve,
implies AR is decreasing,so MR<AR,
therefore,MR curve must below
demand curve which equal to AV
E = -1
D = AR
MR
As monopoly does not have supply curve,price searchers will decide the
price and output according to market demand.
MC
P
= monopoly rent
AC
P
MR = MC
D = AR
MR
Q
Q
MC
P
= monopoly rent
AC
a
b
c
MR = MC
D = AR
MR
Q
How about the area abc?
In economics, this area abc is called efficiency loss.
It becomes a barrier to reach equilibrium which the output is
smaller than price takers those no transaction cost.
Q
Because of this efficiency loss, so many professors
think that monopoly will lead to decrease total
output in society,should be abolished.So many
countries have anti-trust law,especially United
States of America.
MC
P
d
AC
a
P
e
c
b
D = AR
MR
Q
Q
Before price discrimination,
Area dPa : Consumer Surplus Area abc : deadweight loss
Area Peba : Rent
MC
P
d
AC
a
P
e
c
b
D = AR
f
MR
Q
Q*
Q
After Price Discrimination,Seller will charge along the demand
curve.Total output will increase to Q* from Q. Rent increase to
area dfc from area Peba.
The efficiency loss will be reduced.
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