econ 201 ch 9

any impediment that prevents new firms form entering an industry and competing on an equal basis with existing firms

• legal restrictions
• economies of scale
• control of essential resources

• patents and invention incentives
• licenses and other entry restrictions

a legal barrier to entry that grans the holder the exclusive right to sell a product for 20 years from the date the patent application is filed

the process of turning an invention into a marketable product

since a monopoly supplies the entire market, the demand for a monopolistic output is also the market demand

• total revenue/quantity
• demand curve is also the average revenue curve

marginal revenue is less than the price, or average revenue

• a firm with some power to set the price because the demand curve for its output slopes downward
• a firm with market power

• total approach-supplies the quantity at which total revenue exceeds total cost by the greatest amount
• marginal approach-where marginal revenue equals marginal cost

net loss to society when a firm with market power restricts output and increases the price

activities undertaken by individuals or firms to influence public policy in a way that increases their incomes

increasing profit by charging different groups of consumers different prices for the same product

• the firm is a price maker
• there must be at least two groups of consumers for the product
• the firm must be able to charge each group a different price for the same product at little cost
• the firm must be able to prevent those who pay the lower price from reselling the product to those who pay the higher price

• a monopolist who charges a different price for each unit sold
• also called a monopolist's dream
• is able to convert every dollar of consumer surplus into economic profit
• consumers just break even because total benefit equals total cost
• example cell phone service