PERFECT COMPETITION AND MONOPOLIES (3.2)

PERFECT COMPETITION AND MONOPOLIES (.2) 61 Monopolies

62 PERFECT COMPETITION AND MONOPOLIES (.2) BEFORE you start this unit (in pencil)... write the key idea of this unit in the centre of the page write what you know about this idea around it and draw lines to them. try and group the ideas together Mind-maps are very good revision tools. Our minds learn by making patterns. Mind-maps help you to make these patterns and so makes the content easier to learn and remember. mind-map

PERFECT PERFECT COMPETITION AND AND MONOPOLIES (.2) 6 unit overview the power of one The opposite of a perfectly competitive market is a monopoly - i.e. a market with only one firm. This unit looks at how monopolies arise, and how the market conditions of a monopoly affect the pricing and output decisions of the monopolist firm. by the end of this unit, you should be able to answer these questions... 1 what is a monopoly? 2 how do monopolies maximise their profit? monopolies how do monopolies respond to changes in a market?

64 PERFECT COMPETITION AND MONOPOLIES (.2)

PERFECT PERFECT COMPETITION AND AND MONOPOLIES (.2) 65 topic.1 what is a monopoly? one of these things is not like the other one... Monopolies arise when one or more of the conditions of a competitive market are broken. The most commonly broken condition is barriers to entry, i.e. a monopoly is able to keep other firms from entering the market. This topic discusses how monopolies arise and how, in reality, we actually define a monopoly. by the end of this topic, you should be able to... o define a monopoly and explain how one occurs o describe the advantages and disadvantages of a monopoly

66 PERFECT COMPETITION AND MONOPOLIES (.2) Exercise.1 Monopolies Use the Commerce Commission s criteria to determine whether the following firms are monopolies or not. 1. For each example, decide whether the firm has a functional monopoly and a geographical monopoly. Then decide whether it is a pure or near monopoly... or not a monopoly at all. For each example, you should consider whether the suggested market is accurate or not. You may need to redefine the market before you determine whether the firm is a monopoly or not. 1. Telecom... market: home telephone lines 2. Air New Zealand... market: international flights to/from NZ Functional Monopoly Geographical Monopoly Pure Monopoly Near Monopoly. Air New Zealand... market: plane flights to/from Napier (nb no other commercial airlines fly this route) 4. NZ Post... market: mail delivery in NZ 5. NZ Rail... market: rail transport in NZ 6. The Warehouse... market: bulk retailing in Taupo 7. Whakapapa Skifield... market: skiing on north face of Mt Ruapehu 2. In Taupo, there is one shop that hires suits. For school balls it has a (very) near monopoly on suit hire to school students. Explain why this firm could not charge $1,000 per night for students to hire suits - even though it has almost no competition.

What is a Monopoly? PERFECT COMPETITION AND MONOPOLIES (.2) notes 67 What is a Monopoly? A monopoly is any market with only one firm. It s the exact opposite of a perfectly competitive market, where there are lots of firms in the market. A monopoly will occur when one (or more) of the four assumptions of a perfectly competitive market are broken as shown in figure.1 below: Figure.1... Broken Assumptions: Monopolies Perfect Competition Assumption Monopolist s Situation 1. Identical Product the firm produces a unique product that has no close substitutes 2. No Barriers to Entry or Exit other firms are unable to set up in the industry (e.g. high start-up costs, patent or copyright protection, legal barriers). Perfect Knowledge the firm is able to protect its information (e.g. design process) from other producers 4. Many consumers and producers there is only one firm in the market Because at least one of the perfect competition assumptions are broken, we describe a monopoly as an example of imperfect competition, i.e. something is stopping perfect competition from happening. Monopoly: A market with only one producer. Imperfect Competition: A market in which one of the perfect competition assumptions is broken. Is a Monopoly Good or Bad? A monopoly is not necessarily bad. In fact we allow some firms to be a monopoly to reward them for innovating, or providing a good/ service that no-one else does. Patents and copyrights give firms temporary (i.e. a set number of years) protection from other firms copying them. A monopoly is bad when a monopolist acts anti-competitively, i.e. it uses its market position as the only or dominant producer to keep other firms out of the market... AND... to disadvantage consumers by reducing further innovation or overcharging consumers. This is why most countries have anti-competition laws. These laws aim to stop firms from using their position as a dominant producer in a market to reduce competition. They can have wideranging powers, including the ability to break a firm up into smaller firms. In New Zealand, these laws are enforced by the Commerce Commission.

68 PERFECT COMPETITION AND MONOPOLIES (.2) Identify Real Monopolies In theory it should be easy to identify a monopoly there s only one supplier. But in fact it is quite hard to identify one. The Commerce Commission (see Figure.2) focuses on competitive behaviour (or lack thereof), rather than monopolies per se. For example, there is one national railway provider in New Zealand KiwiRail. Is it a monopoly? In a pure sense it is. It is only one commercial rail network in the country which is owned and operated by one firm. Customers wanting to travel by rail have no alternative. But... the key question is what exactly is the product and therefore the industry? KiwiRail has the only commercial rail network throughout all of New Zealand, but the product is transport and there are other alternatives. Private travellers could travel by bus or plane (in fact most do). Firms can deliver their goods by road (truck), ship or plane. Because there are plenty of transport substitutes, KiwiRail is not considered to be a monopoly. Figure.2... The Commerce Commission Based on the economic theory you are studying, monopolies are generally considered to be bad for consumers. But identifying monopolies is a real problem faced by governments around the world. The difficulty can often be proving that a firm is indeed a monopoly. In New Zealand the Commerce Commission monitors markets and ensures that firms do not misuse their monopoly power. The Commission has monitored Telecom, oil companies, ophthalmologists (eye surgeons), Air New Zealand and antas, the Warehouse and many other firms and markets to ensure that sufficient competition exists in these markets and that consumers are not disadvantaged. Two key criteria are the product and the firm s geography. Does the product produced by a firm have any close substitutes and are there any competing firms in the same geographical area that consumers could realistically go to. Functional vs. Geographical Monopoly It is possible for a firm to gain a monopoly in a small part of a wider market. This might be a functional monopoly or a geographical monopoly. A functional monopoly is one where the firm has control over a particular product such as transport. A geographical monopoly is where a firm is the only supplier within a particular region. For example, in the small town of Taupo there is only one movie theatre Starlight Cinema. To go to another movie theatre, people have to drive at least one hour to Rotorua. Therefore it has a geographic or regional monopoly. But you could argue that the market is entertainment not movies. Possible substitutes for going to the movies include getting out a DVD from a local video store. Pure vs. Near Monopoly It is rare to find a pure monopoly, i.e. a firm that has 100% of a market with no close substitutes. It is more realistic to find markets that are dominated by one firm, i.e. a near monopoly. Examples of these include Microsoft worldwide or Telecom in New Zealand. Both firms are quick to point out current or potential competitors to avoid the label of being a monopoly, while others argue that they behave like a monopoly, e.g. have high control over the market price, show little innovation, etc.

PERFECT PERFECT COMPETITION AND AND MONOPOLIES (.2) 69 topic.2 revenue & costs for a monopoly welcome to my world... Because there is only one firm in a monopoly, there are not separate graphs for the market and the firm - as occurs in perfect competition. The monopolist is the market, or at least market supply. This does not mean a monopolist can do what it likes. As we will see, consumers still have the choice about how much of a good or service they will buy. This topic analyses how the revenue curves for a monopolist differ from a perfectly competitive market, and how this affects the price and output decisions of the firm. by the end of this topic, you should be able to... o describe a monopolist firm s average and marginal revenue curves... and explain why they are different to perfect competition o explain how a monopoly maximises its profit and show this on a graph o identify economic profit in a monopoly o identify the shut-down and break-even points for a monopoly o identify the deadweight loss that occurs in a monopoly o compare and contrast a monopoly to perfect competition

70 PERFECT COMPETITION AND MONOPOLIES (.2) The graphs below show the situations facing a monopolistic firm. In each of the graphs do the following: 1. Identify the profit-maximising level of output (*). 2. Show the market price set by the firm (P*).. Show the economic profit. Exercise.2 Monopolies A C B D E F

PERFECT COMPETITION AND MONOPOLIES (.2) 71 Answer the following questions: 1. The graph to the right shows a monopolist maximising profit at which output level? a. a. b. b. c. c. d. d. 2. With marginal revenue of $10 and marginal cost $12, the profit-maximising firm should... a. increase output. b. decrease output. c. leave the output at the present level. d. find a more efficient method of production.. When comparing the perfect competitor with a monopolist in the same market, which of the following is true? a. The monopolist can only make a normal profit in the long-run. b. Monopolists are allocatively efficient. c. A market of perfect competitors tends to produce less at a higher price than a monopoly market. d. A monopoly market tends to produce less at a higher price than perfect competitors. 4. Referring to the graph alongside, if a perfectly competitive market is monopolised and effective barriers to entry exist, there will be an efficiency loss of... a. I. b. BCG. c. JBCI. d. BCDF. You have been asked to advise some local businesses. Five firms have come to you for your recommendation on their pricing and output decisions. a b c d A J I H B F G C D Output uantity Exercise. Monopoly Output & Profits 1. Use the information provided to say whether the firm should... a. remain at its current (pricing and output) position. b. increase price and (consequently) reduce output. c. decrease price and (consequently) increase output. d. go back and look at its figures they don t make sense. Firm Price ($) ($) Output TR ($) TC ($) () () A 1.50 1.20 000 4 500 4 000 1.50 1.20 Recommendations B 1.60 5 000 10 000 10 000 2.00 2.00 C 7.50 6.50 1 000 5.50 5.50 D 1.00 1.10 4 000 2 500 1.10 E 0.90 0.75 4 000 000 at min. level 2. To help the more visual customers, complete the revenue and cost curve graphs for firms A-C. A B C

72 PERFECT COMPETITION AND MONOPOLIES (.2) But wait, there s more! What advice will you give the following firms? Exercise.4 Monopoly s Decisions a. Firm is now at the correct position. b. Firm should increase the price and reduce quantity produced. c. Firm should decrease the price and increase quantity produced. d. Firm should shutdown operations because loss at the best possible operating position exceeds fixed costs. e. This is a nonsense case. Firm Price Output TR TC Total FC A 8.00 4.00 2 000 2 000 4.00.00 B 5.00 4.00 1 000 4 000 1 000 Answer at min. level C 4 000 8 000 1 000 1.0 2.20 D 8.00 0.00 2 000 20,000 5 000 4.00 E 1.00 2.00 10 000 2 000 2.00 2.00 F.00 1.60 2 000 1,800 at min. level 1.60 G 2.50 2.00 10 000 4 000.00 2.00 2. Draw the graphs for each of the situations above. Be sure to identify any economic profit. A B C D AVC. The graph on the right shows a monopolistic market. On the graph, show: - the profit-maximising price (P MON ) - the profit-maximising quantity ( MON ) - the supernormal profit Revenue / Costs () Also on the graph, show - the price (P PC ) and quantity ( PC )that would occur if the market was perfectly competitive - the deadweight loss due to the market being monopolistic AVC

Revenue & Costs for a Monopoly PERFECT COMPETITION AND MONOPOLIES (.2) notes 7 Identify a Monopolist s Revenue Curves and Demand The cost curves for an individual firm (see Unit ) are the same in any type of market perfectly competitive or imperfectly competitive. The big difference between the two types of markets is the revenue curves. In a monopoly there is only one firm. This means that the (downward-sloping) market demand curve is also the demand curve for the individual firm. The revenue curves facing a monopolist are shown in Figure.. Price $/kg The Market for Nectarines Figure.... Revenue Curves for a Monopoly Market demand is also the firm s demand curve. This is represented by the average revenue () curve. Note: The marginal revenue () curve always intersects the horizontal (quantity) axis exactly half-way between the origin and where the curve intersects the axis. =D Describe a Monopolist s Pricing and Output Decisions Because there is only one firm in a monopolistic market, it is tempting to think that it can do what it likes, i.e. sell as many (or few) goods as it likes, at any price and in any quality. However, this is not accurate. Monopolies, like any firm in any type of market, must still meet the wants and needs of consumers. Monopolies can t set BOTH price and market output. In any market, consumers have consumer sovereignty. If the monopoly determines the price, consumers will choose how much of the good or service they will buy. If it sets the level of output, consumers will determine what price they are willing to pay for that output.

74 PERFECT COMPETITION AND MONOPOLIES (.2) Identify Profit Maximisation for a Monopolist Remember that we are assuming that the only goal of firms is profit maximisation (or lossminimisation) regardless of market type. As we saw in perfectly competitive markets, profit is maximised at the level of output where marginal revenue () equals marginal cost (). Beyond this level of output, the extra cost of production () exceeds the additional revenue () and so profit would start to fall. Figure.4... Finding a Monopolist s Profit Maximisation Level of Output and Price Price $/kg P PM The Market for Nectarines 1. Profit Maximisation Identify where crossed the curve. 2. Market Output Draw a vertical line down from = to the X-axis to identify profit-maximising output ( PM ). =D. Market Price Draw a line up from PM to the curve. Draw a line from this point on the curve to the y-axis to identify profit maximising price level (P PM ). PM Identify Normal, Supernormal and Subnormal Profits Just like perfectly competitive firms, monopolies can earn subnormal, normal or supernormal profit. To find out what kind of profit a monopoly is earning, we find the profit maximising (loss minimising) level of output - i.e. where =, and then compare and (see figure.5). Figure.5... Economic Profit for a Monopoly Price $/kg P PM SUPERNORMAL The Market for Nectarines Supernormal Profit At the profit maximising level of output, >. The firm is making a supernormal profit (shaded rectangle). Unlike a perfectly competitive market, this situation can last in the long-term, as barriers to entry prevent other firms from entering the market and lowering the price. =D PM

PERFECT COMPETITION AND MONOPOLIES (.2) 75 Figure.5 (continued)... Economic Profit for a Monopoly Price $/kg The Market for Nectarines Normal Profit At the profit maximising level of output, =. The firm is making a normal profit. P PM Like a perfectly competitive market, this situation can last in the long-term. =D PM Price $/kg The Market for Nectarines Subnormal Profit At the loss minimising level of output, <. The firm is making a subnormal profit (shaded rectangle). P PM SUBNORMAL Note that the market price is still based on the curve. The firm would like to charge more than this price but consumers are not willing (or able) to pay more for that quantity of goods. PM =D In the short-run the firm will stay in the market but may temporarily shut-down (if < AVC at that level of output). It cannot leave the market however as at least one factor of production is fixed. In the long-run, the monopolist will leave the market if it cannot increase the market price or lower its costs of production. Identify a Monopolist s Shut-Down Point (Short-Run Decision) In the short-run a monopolistic firm face similar decisions as a perfectly competitive firm, i.e. 1. how much to produce? 2. stay open or shut down? The one difference is that a monopolist can also choose what price it will sell it goods at. So it s third choice is:. what price to charge consumers? In the short-run the monopolist can t leave the industry (just like a perfectly competitive firm) because at least one factor of production (resource) is fixed. Therefore it must decide how much to sell or what price to sell at, and whether to stay open or shut down. Remember... a monopoly can t decide both the price AND quantity.

76 PERFECT COMPETITION AND MONOPOLIES (.2) Figure.6... Shutdown in an Monopoly Revenue & Costs ($) P SD P LM The Market for Medium Density Fibreboard (MDF) AVC A monopoly will shut down when it is loss minimising (i.e. = ) and its price is below the AVC curve. The graph alongside shows a firm where demand () has fallen below AVC. In this situation the firm is loss-minimising ( LM ) and the price at this output level (P LM ) does not cover the firm s average variable costs (P SD ). The monopolist will will minimise its loss by shutting down and producing nothing. =D LM Assuming the firm is profit-maximising (loss-minimising) by choosing the appropriate quantity or price, its only choice left is whether to shut down. Figure.6 shows a firm that should shut down. Demand () is so low that the loss-minimising output results in a price below its average variable cost (AVC). Just like a perfectly competitive firm (see page 9), the monopolist will minimise its loss and shutting down. Remember that shutting down is different to leaving the industry. It means temporarily stopping production, but now selling fixed assets like machines, factories, land, etc. If demand improves in the long-run, the firm will re-open. Alternatively if demand does not improve and the firm is not breaking even, then it will leave the industry. This is discussed in the next section Identify a Monopolist s Break-Even Point (Long-Run Decision) In the long-run a monopoly will only stay in the industry if it is breaking even, i.e. its selling point is at or above its average cost of production. Yes, you guessed - just like a perfectly competitive firm. The difference between a monopoly and a perfectly competitive firm, is that a monopoly can earn supernormal profits in the long-run because there are barriers to other firms entering the market. Figure.7 shows a firm that is not breaking even in the long-run and so will leave the industry. Revenue & Costs ($) Figure.7... Breakeven in an Monopoly In the graph alongside, the firm s selling price (P PM ) does not cover its average cost of production. - i.e. it is not breaking even. P BE If this is a long-run situation, the firm will leave the industry. P PM =D PM

PERFECT COMPETITION AND MONOPOLIES (.2) 77 Identify Monopoly Equilibrium and Deadweight Loss The main problem with monopolies (or any imperfectly competitive market) is that they don t achieve allocative efficiency. This is because in a monopoly the profit-maximising level of output (=) never equals the competitive market equilibrium (i.e. S=D... or... = ). The profit-maximising level of output will alway be below market equilibrium (see figure.8), resulting in deadweight loss... i.e. lost consumer and producer surplus. Figure.8... Deadweight Loss in a Monopolistic Market Price $/kg P MON P PC The Market for Nectarines Deadweight Loss AVC In a perfectly competitive market, market forces would result in market equilibrium occurring at the level of output where supply () = demand (), i.e. PC In a monopoly however, the profit-maximising level of output ( MON ) will always be less than equilibrium in a competitive market. This means there is a loss of allocative efficiency... less goods or services are produced than consumers are willing and able to buy... and at a higher price. This lost efficiency or deadweight loss is represented by the shaded triangle. =D MON PC

78 PERFECT COMPETITION AND MONOPOLIES (.2) Compare Market Output in a Monopoly to a Perfectly Competitive Market Unless it is regulated (see unit 4), a monopoly will always result in a lower level of market output and a higher market price than a perfectly competitive market (assuming firms face the same cost curves in both markets). This happens because a monopoly s demand curve is downward-sloping, and therefore its and curves are separate. Consequently a monopoly will produce at an output level below that of a perfectly competitive market. Figure.9 shows this by taking a market (Graph 1) and comparing how this would look to individual firms if the market was perfectly competitive (Graph 2) or monopolistic (Graph ). Both firms face exactly the same cost curves. The only difference between the two firms are the revenue curves. Because the monopoly s demand () curve is downward sloping, there is a separate marginal revenue curve. This will cause the firm to reduce output or raise its price to maximise its profit. This situation won t last in a perfectly competitive market. If firms inside the industry were earning a supernormal profit, other firms would enter the market and lower the price until all firms earn normal profits. Figure.9... Output in Different Market Structures Price Graph 1: Perfectly Competitive Market Price Graph 2: Perfectly Competitive Firm S 2.90 2.90 ==D 1 500 D 1 500 Price Graph : Monopoly Firm These graphs show two markets with identical costs (i.e. and are the same in both markets), but graphs 1 and 2 show a perfectly competitive market, while graph shows a monopoly..40 In the perfectly competitive market, individual firms face a horizontal demand curve, i.e. they are price-takers. Competition will force the price down (and therefore output up) until all firms are earning normal profits. =D In a monopoly, the firm faces a downwardsloping demand curve. This causes it to lower output (or raise the price) to maximise its profits. 1 200

PERFECT COMPETITION AND MONOPOLIES (.2) 79 Compare the Efficiency of Monopolistic and Perfectly Competitive Markets As well as reducing the market output, monopolies also reduce the allocative efficiency in a market, and causes deadweight loss. As we ve seen, a monopoly will profit maximise by reducing the market output and consequently raising the price. Because consumer surplus is the area between the demand curve and market price, an increase in price must reduce consumer surplus. Figure.10 compares the allocative efficiency of two markets - the same two markets as in Figure.9. The graph of the monopolistic market shows that the consumer surplus decreases due to the higher price being charged to consumers. It also results in deadweight loss. Figure.10... Allocative Efficiency in Different Market Structures Price Monopoly Price Perfectly Competitive Market.40 consumer surplus deadweight loss 2.90 consumer surplus S =D D 1 200 1 500 In a monopolistic market, the firm s profitmaximising results in market output falling and the price rising. This causes consumer surplus to decrease and deadweight loss to occur. The deadweight loss is the consumer and producer surplus that would occur in a competive market, but is lost in a monopolistic market. In the perfectly competitive market, the market is at equilibrium, and so both consumer and producer surplus are maximised. The consumer surplus in this market is greater than than in a monopoly... because the market price is lower AND the market quantity is higher. Note: We should also show producer surplus, but it becomes difficult with the curved cost curves. Therefore this example only shows the impact on consumer surplus and the deadweight loss. Less goods are produced in the monopolistic market. Therefore there is some consumer surplus and producer surplus (not shown in the graph) that would exist if the firm was perfectly competitive, but is not experienced by anyone in the monopolistic market, i.e. deadweight loss.

80 PERFECT COMPETITION AND MONOPOLIES (.2)

PERFECT PERFECT COMPETITION AND AND MONOPOLIES (.2) 81 81 revision

82 PERFECT COMPETITION AND MONOPOLIES (.2) This question checks that you can: identify and explain the profit-maximising output level for a monopoly compare short-run and long-run decisions of a monopolist use marginal analysis to explain a monopolist s output decisions. Revenue / Cost ($) Graph 1: A Monopoly Revision.1 Monopolies uantity 1. On Graph 1 identify and label: a. the monopolist s marginal revenue () curve. b. Identify the profit-maximising price (P MON ) and profit-maximising (loss-minimising) quantity ( MON ). c. the economic profit the monopolist firm will earn at MON 2. Use marginal analysis to explain why the monopolist firm maximises its profit (minimises its loss) at MON.

PERFECT COMPETITION AND MONOPOLIES (.2) 8. On Graph 1, add an average variable curve (AVC) that would mean the firm decides to shut-down in the shortrun. 4. Compare the behaviour of the monopolist in the short-run and the long-run if the market situation and costs of production do NOT change in the long-run. Revision.1 Monopolies

84 PERFECT COMPETITION AND MONOPOLIES (.2) This question checks that you can: describe the characteristics of a monopoly and how they affect its decisions identify and explain the profit-maximising price and output for a monopoly analyse the impact of changes to a monopolistic market The significant cost of building a new airport and high level of regulations, means that Auckland Airport operates as a monopoly in the Auckland Market for airline landing rights in Auckland. Revision.2 Monopolies Revenue / Cost ($) Graph 2: Market for Airline Landing Rights In Auckland 1. With reference to at least two characteristics of a monopoly, explain what Auckland Airport can be described as a monopoly. uantity 2. On Graph 2 show and label an average revenue : a. draw and label an appropriately placed average revenue () curve for Auckland Airport. b. draw and label an appropriately placed average cost () curve, to show Auckland Airport earning a supernormal profit c. identify and label the profit-maximising price (P MON ) and profit-maximising quantity ( MON ). d. shade in the area of supernormal profit.. On Graph 2, identify the deadweight loss that occurs as a result of Auckland Airport being a monopoly. 4. Explain why deadweight loss occurs in a monopolistic market.

PERFECT COMPETITION AND MONOPOLIES (.2) 85 5. Use marginal analysis to explain why Auckland Airport will produce at the price P MON to maximise its profits. 6. Use marginal analysis to explain how Auckland Airport would respond to a change in market demand. You do not have to show your changes on Graph 2. Include in your full explanation: the effect on average revenue () and marginal revenue () of an increase in demand for landing rights in Auckland what decisions Auckland Airport is likely to make regarding its level of output and the price it charges for landing rights in Auckland the use of marginal analysis to explain Auckland Airport s output and pricing decisions Revision.2 Monopolies

86 PERFECT COMPETITION AND MONOPOLIES (.2) This question checks that you can: identify the profit-maximising price and output level for a monopoly compare short-run and long-run decisions of a monopolist compare the price, output and allocative efficiency of a monopoly to a perfectly competitive market Graph : Monopolistic Market Revision. Monopolies Costs & Revenues ($) uantity 1. On Graph above: a. Identify the profit maximising output as MON and the profit-maximising price as P MON. b. Add an average cost curve () showing the monopoly earning normal profits at the profit maximising output MON. 2. Use marginal analysis to explain why the firm maximises its profits by producing at MON.

PERFECT COMPETITION AND MONOPOLIES (.2) 87. On Graph show the price (P PC ) and quantity ( PC ) that would occur in the market if it was perfectly competitive. 4. Identify the deadweight loss that occurs in a monopolistic market. 5. Compare and contrast the market outcomes depending on whether the market is perfectly competitive or monopolistic. Your answer should clearly refer to... the equilibrium price and quantity the allocative efficiency of the market the impact on producers and consumers... depending on whether the market is monopolistic or perfectly competitive. Revision. Monopolies

88 PERFECT COMPETITION AND MONOPOLIES (.2) UNIT Unit Content: Monopolies.1 What is a Monopoly What is a Monopoly? Is a Monopoly Good or Bad? Identify Real Monopolies.2 Revenue and Costs for a Monopoly Identify a Monopolist s Revenue Curves and Demand Describe a Monopolist s Pricing and Output Decisions Identify Profit Maximisation for a Monopolist Identify Normal, Supernormal and Subnormal Profits Identify a Monopolist s Shut-Down Point (Short-Run Decisions) Identify a Monopolist s Break-Even Point (Long-Run Decisions) Identify Market Equilibrium and Deadweight Loss Compare Market Output in a Monopoly to a Perfectly Competitive Market 1 (poor) Understanding 2 (good) checklist: I have... done a mind-map of the main ideas (before and after I ve done the work) tried (and marked) all of the exercises watched the online videos of this work read the notes and summarised the key ideas in the margins of the pages made (or downloaded from quizlet) flashcards of the key ideas and definitions relevant current events and examples: relevant events and examples for this unit are: I didn t really get the following parts of this unit...... and I m going to ask to help me with this