Chapter 15

This chapter focused on monopolies and how they operate. It compared them to a competitive firm or market, commenting on their differences and similarities, but also on how decide on production, prices, and how they are regulated. The chapter kept referring to how a certain rule or application was the same as in competitive markets, which helped since I have a stronger understanding of it. The idea of deadweight losses and the graph is still an iffy idea to me, but I think the class lecture should help. Monopolies arise from three factors: a firm owns a key resource for production, the government gives a single from the rights to produce a good, or the costs of one firm to produce a good is less than if other firms joined the market. Since monopolies have so much market power, they decide on the quantity to produce and the price to charge, but that doesn’t mean they can charge whatever they want. Their demand is downwards sloping, so the more the charge, the less of a demand, unlike price takers who jus decided the quantity to produce in a horizontal demand curve. Monopolies are regulated through pricing, antitrust laws, make them government owned, or are left alone, since the market can reach a socially profitable equilibrium on its own at times.

It’s a fairly easy chapter, but the graphs can get a bit confusing, I should be able to clear that up, and be reassured by going over the material is class.