Chapter Summary

Key Points

  1. Explain how monopoly arises and distinguish between single-price monopoly and price-discriminating monopoly.

    • In monopoly, a single producer of a good or service that has no close ­substitutes operates behind a natural, legal, or ownership barrier to entry.

    • A monopoly can price discriminate when there is no resale possibility.

    • Where resale is possible, a firm charges a single price.

  2. Explain how a single-price monopoly determines its output and price.

    • The demand for a monopoly’s output is the market demand, and a single-price monopoly’s marginal revenue is less than price.

    • A monopoly maximizes profit by producing the quantity at which marginal revenue equals marginal cost and by charging the maximum price that consumers ...

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