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MONOPOLY
I. Market structure
A. Characteristics (assumptions) of monopoly
1. One firm in industry
2. Entry is blockaded
B. Entry barriers as an important determinant of market structure
1. Examples of entry barriers
a. Economies of scale
b. Natural monopoly
c. Ownership of essential raw materials
d. Patents
e. Legal restrictions
II. Firm conduct
A. Theory of monopoly in short-run
1. Monopolist’s demand curve
a. Two important implications
1. Monopolist is a price setter
2. Price is greater than marginal revenue
2. Finding short-run equilibrium
B. Theory of monopoly in the long-run
1. Blockaded entry and the equivalence of short and long-run equilibriums
III. Market performance
A. Major argument against monopolistic markets
1. Monopolistic markets are inefficient
a. Production efficiency
b. Allocation efficiency
2. Antitrust laws and monopolistic markets
IV. Price discrimination
A. What is price discrimination
B. Why do firms practice price discrimination
C. Necessary conditions for price discrimination
1. Firm is a price-setter
2. Firm can separate customers into elastic and inelastic groups
3. No resale
D. Price discrimination model
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