1. Monopoly This firm is now the ultimate market power in the galaxy

2. Monopoly = Market O The lack of direct competition means that a monopoly behaves differenty than does a firm in a competitive market O In monopoly situations, the demand curve facing the firm is the same as the market demand curve.

3. Price vs Marginal Revenue O FOR FIRMS IN COMPETITIVE MARKETS: O Price = Marginal Revenue O When the price is set by the market, the additional revenue from one more unit of output is the same as the market price O FOR MONOPOLY FIRM: O Price > MR O When a monopoly firm selects its output level, it is subject to the Law of Demand O In order to sell additional amounts of output, the price must decrease O The MR curve will be below the price curve at every point except the first

4. Profit Maximization O In addition to making a decision on output, monopoly firms must make a pricing decision as well. O General Profit Maximization Rule O When MR = MC profit is maximized

5. Monopoly Price & Profits O The profit maximizing rate of output is found at the intersection of the marginal revenue and marginal cost curves O The highest price consumers are willing to pay for a specific quantity of output is established by the demand curve O Only ONE price maximizes profit

6. Barriers to Entry O Threat of Entry O Monopolies attain higher prices and profits by limiting output O This power depends on oother firms not entering the market O Types of Barrier to Entry: O Patent Protection O Legal Harassment O Exclusive Licensing O Bundled Products O Government Franchises

7. Comparative Outcomes O Monopoly vs Competition O See chart on pg 156 O Monopoly vs Duopoly O Monopoly vs Oligopoly O Monopoly vs Monopolistic Competition

8. Defenses of Monopoly O Entrepreneurial Incentives O Economies of Scale O Natural Monoplies O Contestable Markets O Structure vs Behavior

9. Practice Problems for Homework O Page 166 O Problems # 2, 4, 6, 7, 8