Scot Wick Blog

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 15 of 32 - Monopoly Section 5 of 32 … Figure 1 – Economies of Scale as a Cause of Monopoly When a firm's average total cost (ATC) curve for producing a product continually declines, the firm has a natural monopoly. In this case, if production is divided among more firms, each firm produces less and ATC rises. For this product, a single firm can produce any given amount at the smallest cost. … The fundamental cause of monopoly is barriers to entry into a market. Three main sources of barriers to entry into a market are: ·1· monopoly resources, a single firm owns a key resource required for production ·2· government regulation, the government gives a single firm exclusive right to produce a good or service ·3·the production process, a single firm can produce a product at a lower cost than can a larger number of producers … ·3· Production Process An ...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 15 of 32 - Monopoly Section 4 of 32 … The fundamental cause of monopoly is barriers to entry into a market. Three main sources of barriers to entry into a market are: -1- monopoly resources, a single firm owns a key resource required for production -2- government regulation, the government gives a single firm exclusive right to produce a good or service -3 - the production process, a single firm can produce a product at a lower cost than can a larger number of producers … -2- Government Regulation Monopolies are created when government gives one person or firm the exclusive right to sell or license some good or service. A monopoly can be created by the political clout of the would-be monopolist. Autocrats often grant exclusive business licenses to relatives, friends and allies. … Government can grant a monopoly to a person or firm when it is deeme...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 15 of 32 - Monopoly Section 3 of 32 … A firm is a monopoly if · it is the sole seller of a product · the product does not have close substitutes The fundamental cause of monopoly is barriers to entry. A monopoly firm remains the only seller in its market because other firms cannot enter the market and compete with it. Three main sources of barriers to entry are: -1- monopoly resources, a single firm owns a key resource required for production -2- government regulation, the government gives a single firm exclusive right to produce a good or service -3 - the production process, a single firm can produce a product at a lower cost than can a larger number of producers … -1- Monopoly Resources In this case a single firm owns a key resource. Consider the market for water in an Old West small town. If dozens of town residents have working wells this woul...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 15 of 36 - Monopoly Section 2 of 32 … Most computers use the Microsoft Windows operating system. Microsoft has a copyright giving it the exclusive right to make and sell Windows. If a person wants to buy Windows, they have no choice but pay Microsoft’s price. Microsoft is said to have a monopoly in the Windows market. … The Windows market is not a competitive one, where · there are many firms offering identical products · each firm has little influence over the price it receives A monopoly such as Microsoft has no close competitors, therefore the firm has the market power to influence the market price of its product. A monopoly firm is a price maker, as compared to a competitive firm which is a price taker. … We will see market power alters the relationship between a firm's costs and the price at which it sells its product. A competitive firm · ta...

  Capitalists Don’t Like Capitalism They do not like competition which is at the core of capitalism. … Mostly from article Fake Capitalism Is A Bigger Threat Than Socialism. Patrick Watson. February 27, 2021. Many people are worried socialism will take over the U.S. Socialism can mean many things. You hear it applied to state-dominated economies as varied as Venezuela, Norway and China. These fears would be groundless if we do a better job of preserving capitalism. … Capitalism is all about free markets, “free” in the sense anyone has the opportunity to compete against anyone else. Consumers decide who wins. Largely that’s not what we have in the U.S. today, and it’s the way most “capitalists” want it. They want the opposite: freedom to sell their wares to consumers who have no choice at all. All businesspeople naturally want fewer or no competitors which means more profits. Being a monopolist is highly profitable. … In their book The Myth of Capitalism: Monopolies and the Death of...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 14 of 36 - Firms In Competitive Markets Section 22 of 22 … With a competitive market the assumptions are · there are a large number of potential entrants · each of which faces the same costs · the long-run market supply curve is horizontal at the minimum of average total cost (ATC) When the demand for the good increases, the long-run result is · an increase in both the number of firms and in the total quantity supplied · without any change in the price … However, there are two reasons the long-run market supply curve might slope upward. ·1· Some resources used in production may be available only in limited quantities. Consider the market for farm products. Anyone can buy land and start a farm, but the quantity of land is limited. As more people become farmers, the price of farmland is bid up. This raises the costs of all farmers in the market, esp...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 14 of 36 - Firms In Competitive Markets Section 21 of 22 … The market response of firms to a change in demand depends on the time frame. Firms can enter and exit a market in the long run but not in the short run. Consider a market for milk, beginning at long-run equilibrium. Milk-supplying firms are earning zero economic profit, price equals the minimum of Average Total Cost (ATC). Figure 8 panel (a) shows this initial condition · quantity sold in the market is Q1 · price is P1 · long-run equilibrium is point A … Suppose scientists discover milk has wondrous health benefits. Panel (b) shows the short-run response · demand curve for milk shifts from D1 to D2 · quantity demanded and supplied rises from Q1 to Q2 · price rises from P1 to P2 · short-run equilibrium moves from point A to point B · short-run profits are generated, shown by the shaded are...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 14 of 36 - Firms In Competitive Markets Section 20 of 22 … Figure 8 - An Increase in Demand in the Short Run and Long Run Panel (a) initial condition The market starts in a long-run equilibrium, point A. In this equilibrium · each firm makes zero profit · the price equals the minimum average total cost (ATC) … Panel (b) short-run response This shows what happens in the short run when demand rises from D1 to D2. The equilibrium · goes from point A to point B · price rises from P1 to P2 · quantity sold in the market rises from Q1 to Q2 Because price now exceeds ATC firms make profits. This encourages new firms to enter the market. … Panel (c) long-run response This shows what happens in the long run after new firms enter the market. · short-run supply curve shifts to the right from S1 to S2 · the equilibrium goes from point B to point C · price has ...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 14 of 36 - Firms In Competitive Markets Section 20 of 22 … Figure 8 - An Increase in Demand in the Short Run and Long Run Panel (a) initial condition The market starts in a long-run equilibrium, point A. In this equilibrium · each firm makes zero profit · the price equals the minimum average total cost (ATC) … Panel (b) short-run response This shows what happens in the short run when demand rises from D1 to D2. The equilibrium · goes from point A to point B · price rises from P1 to P2 · quantity sold in the market rises from Q1 to Q2 Because price now exceeds ATC firms make profits. This encourages new firms to enter the market. … Panel (c) long-run response This shows what happens in the long run after new firms enter the market. · short-run supply curve shifts to the right from S1 to S2 · the equilibrium goes from point B to point C · price has ...