垄断曼昆经济学原理第七版.pptx

PowerPoint Slides prepared by:Andreea CHIRITESCUEastern Illinois University15Monopoly 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.1Why Monopolies AriseMarket powerAlters the relationship between a firms costs and the selling priceMonopolyCharges a price that exceeds marginal cost A high price reduces the quantity purchasedOutcome:often not the best for society 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.2Why Monopolies AriseGovernmentsCan sometimes improve market outcomeMonopolyFirm that is the sole seller of a product without close substitutesPrice makerCause:barriers to entry 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.3Why Monopolies AriseBarriers to entryA monopoly remains the only seller in the market Because other firms cannot enter the market and compete with itMonopoly resourcesGovernment regulationThe production process 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.4Why Monopolies AriseMonopoly resourcesA key resource required for production is owned by a single firmHigher price 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.5“Rather than a monopoly,we like to consider ourselves the only game in town.”Why Monopolies AriseGovernment regulationGovernment gives a single firm the exclusive right to produce some good or serviceGovernment-created monopoliesPatent and copyright lawsHigher pricesHigher profits 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.6Why Monopolies AriseNatural monopolyA single firm can supply a good or service to an entire marketAt a smaller cost than could two or more firmsEconomies of scale over the relevant range of outputClub goodsExcludable but not rival in consumption 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.7Figure 18 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Economies of Scale as a Cause of MonopolyCostsWhen a firms average-total-cost curve continually declines,the firm has what is called a natural monopoly.In this case,when production is divided among more firms,each firm produces less,and average total cost rises.As a result,a single firm can produce any given amount at the least costQuantity of output 0Average total costProduction and Pricing DecisionsMonopolyPrice makerSole producerDownward sloping demand:the market demand curveCompetitive firmPrice takerOne producer of manyDemand is a horizontal line(Price)2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.9Figure 210 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Demand Curves for Competitive and Monopoly FirmsPriceBecause competitive firms are price takers,they in effect face horizontal demand curves,as in panel(a).Because a monopoly firm is the sole producer in its market,it faces the downward-sloping market demand curve,as in panel(b).As a result,the monopoly has to accept a lower price if it wants to sell more output.Quantity of output 0(a)A Competitive Firms Demand CurvePriceQuantity of output 0(b)A Monopolists Demand CurveDemand Demand Production and Pricing DecisionsA monopolys total revenue Total revenue=price times quantityA monopolys average revenueRevenue per unit soldTotal revenue divided by quantityAlways equals the price 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.11Production and Pricing DecisionsA monopolys marginal revenueRevenue per each additional unit of outputChange in total revenue when output increases by 1 unitMR PDownward-sloping demandTo increase the amount sold,a monopoly firm must lower the price it charges to all customersCan be negative 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.12Table 113 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.A Monopolys Total,Average,and Marginal RevenueProduction and Pricing DecisionsIncrease in quantity soldOutput effectQ is higher:increase total revenuePrice effectP is lower:decrease total revenueBecause MR MC:increase productionIf MC MR:produce lessMaximize profitProduce quantity where MR=MCIntersection of the marginal-revenue curve and the marginal-cost curvePrice:on the demand curve 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.16Figure 417 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Profit Maximization for a MonopolyCostsandRevenueA monopoly maximizes profit by choosing the quantity at which marginal revenue equals marginal cost(point A).It then uses the demand curve to find the price that will induce consumers to buy that quantity(point B).Quantity0Average total costDemandMarginal revenueMarginal costQMAXBMonopolypriceA1.The intersection of the marginal-revenue curve and the marginal-cost curve determines the profit-maximizing quantity.2.and then the demand curve shows the price consistent with this quantity.Q1Q2Production and Pricing DecisionsProfit maximizationPerfect competition:P=MR=MCPrice equals marginal costMonopoly:PMR=MC Price exceeds marginal costA monopolys profitProfit=TR TC=(P ATC)Q 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.18Figure 519 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.The Monopolists ProfitCostsandRevenueThe area of the box BCDE equals the profit of the monopoly firm.The height of the box(BC)is price minus average total cost,which equals profit per unit sold.The width of the box(DC)is the number of units sold.Quantity0DemandBEDMarginal revenueQMAXAverage total costMarginal costMonopolypriceCMonopolyprofitAveragetotalcostMonopoly Drugs versus Generic DrugsMarket for pharmaceutical drugsNew drug,patent laws,monopolyProduce Q where MR=MCPMCGeneric drugs:competitive marketProduce Q where MR=MCAnd P=MCPrice of the competitively produced generic drugBelow the monopolists price 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.20Figure 621 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.The Market for DrugsCostsandRevenueWhen a patent gives a firm a monopoly over the sale of a drug,the firm charges the monopoly price,which is well above the marginal cost of making the drug.When the patent on a drug runs out,new firms enter the market,making it more competitive.As a result,the price falls from the monopoly price to marginal cost.Quantity0DemandMarginal revenueMonopolyquantityPriceduringpatent lifeMarginal costPrice afterpatentexpiresCompetitivequantityThe Welfare Cost of MonopoliesTotal surplusEconomic well-being of buyers and sellers in a marketSum of consumer surplus and producer surplusConsumer surplusConsumers willingness to pay for a goodMinus the amount they actually pay for it 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.22The Welfare Cost of MonopoliesProducer surplusAmount producers receive for a goodMinus their costs of producing itBenevolent planner:maximize total surplusSocially efficient outcomeProduce quantity whereMarginal cost curve intersects demand curveCharge P=MC 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.23Figure 724 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.The Efficient Level of OutputCostsandRevenueA benevolent social planner maximizes total surplus in the market by choosing the level of output where the demand curve and marginal-cost curve intersect.Below this level,the value of the good to the marginal buyer(as reflected in the demand curve)exceeds the marginal cost of making the good.Above this level,the value to the marginal buyer is less than marginal cost.Quantity0Demand(value to buyers)EfficientquantityMarginal costValuetobuyersValuetobuyersCost tomonopolistCost tomonopolistValue to buyers is greater than cost to sellersValue to buyers is less than cost to sellersThe Welfare Cost of MonopoliesMonopoly Produce quantity where MC=MRProduces less than the socially efficient quantity of outputCharge P MCDeadweight lossTriangle between the demand curve and MC curve 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.25Figure 826 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.The Inefficiency of MonopolyCosts andRevenueBecause a monopoly charges a price above marginal cost,not all consumers who value the good at more than its cost buy it.Thus,the quantity produced and sold by a monopoly is below the socially efficient level.The deadweight loss is represented by the area of the triangle between the demand curve(which reflects the value of the good to consumers)and the marginal-cost curve(which reflects the costs of the monopoly producer).Quantity0DemandMarginal revenueMonopolyquantityMarginal costMonopolypriceEfficientquantityDeadweight lossThe Welfare Cost of MonopoliesThe monopolys profit:a social cost?Monopoly-higher profitNot a reduction of economic welfareBigger producer surplusSmaller consumer surplus Not a social problemSocial loss=Deadweight lossFrom the inefficiently low quantity of output 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.27Price DiscriminationPrice discriminationBusiness practiceSell the same good at different prices to different customersRational strategy to increase profitRequires the ability to separate customers according to their willingness to payCan raise economic welfare 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.28Price DiscriminationPerfect price discriminationCharge each customer a different priceExactly his or her willingness to payMonopoly firm gets the entire surplus(Profit)No deadweight loss 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.29Price DiscriminationWithout price discriminationSingle price MCConsumer surplusProducer surplus(Profit)Deadweight loss 2015 Cengage Learning.All Rights Reserved.May not be copied,scanned,or duplicated,in whole or in part,except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.30Figur