Managerial Economics and Strategy, 2/e

9 Monopoly

Monopoly: one parrot.

Learning Objectives

1. Describe how a monopoly chooses an output level to maximize its profit.

2. Define and measure the extent of a monopoly’s market power.

3. Show how monopoly causes a market failure.

4. Identify the causes of monopoly.

5. Explain how a monopoly uses advertising to increase its profit.

6. Describe how a monopoly may take advantage of behavioral network effects to increase its profit.

Managerial Problem Brand-Name and Generic Drugs

A firm that creates a new drug may receive a patent that gives it the right to be the monopoly or sole producer of the drug for up to 20 years. As a result, the firm can charge ...