Microeconomics chapter 14

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  1. assumptions of a monopoly
    one firm, unique product, entry blocked
  2. different barriers that lead to monopoly
    • gov't blocks entry
    • control of a key resource
    • network externalities
    • economies of scale (sometimes leads to natural monopoly)
  3. how does a monopoly decide on the profit maximizing price and output level?
    produce at the quantity that makes MR equal MC
  4. how does a monopoly decrease economic efficiency with respect to a perfectly competitive market?
    • By increasing the price and reducing the quantity produced, the monopolist reduces
    • economic surplus and creates a deadweight loss, which represents the loss of economic efficiency due
    • to monopoly.
  5. analyze govt policy towards monopolies
    • antitrust laws prevent firms from creating monopolies
    • regulate the natural monopolies and the price they charge
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Microeconomics chapter 14
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monopolies
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