CHARACTERISTICS OF A MONOPOLY ECONOMICS SOFTWARE

If a firm is in a competitive market and produces at Q2, its average costs will be AC2. For example, supermarkets squeezing prices paid to farmers. Monopolies may use their supernormal profits and monopsony power to pay lower prices to suppliers. Lack of competition may also lead to improved product innovation. – higher average costs because it gets too big Diseconomies of scale – It is possible that if a monopoly gets too big, it may experience diseconomies of scale.Supermarkets have been criticised for paying low prices to farmers.

Higher prices to suppliers – A monopoly may use its market power and pay lower prices to its suppliers.A monopolist makes supernormal profit Qm * (AR – AC ) leading to an unequal distribution of income.

Therefore the AC curve is higher than it should be. It is argued that a monopoly has less incentive to cut costs because it doesn’t face competition from other firms. A monopoly is productively inefficient because it is not the lowest point on the AC curve. In a competitive market, the price would be lower and more consumers would benefit A monopoly is allocatively inefficient because in monopoly the price is greater than MC. This leads to a decline in consumer surplus and a deadweight welfare loss

Higher prices Higher price and lower output than under perfect competition.

Blue area = Deadweight welfare loss (combined loss of producer and consumer surplus) compared to a competitive market.

Red area = Supernormal Profit (AR-AC) * Q.

Compared to a competitive market, the monopolist increases price and reduces output.

This will be at output Qm and Price Pm.

A monopolist will seek to maximise profits by setting output where MR = MC.

Microsoft was ultimately forced to stop its exclusionary practices.

CHARACTERISTICS OF A MONOPOLY ECONOMICS SOFTWARE

( IBM) computers and its ability to exclude other software developers by preventing their products from being installed on computers with Microsoft's operating system. ( MSFT) to have a monopoly in the software industry because of its dominance of operating systems software used in International Business Machines Corp. ( T) operated as a legal monopoly in the telephone industry for many decades until 1982 when it was forced to break up into eight smaller companies, almost all of which have since become a part of AT&T again. Court of Appeals eventually deemed it in violation of the Sherman Antitrust Act and forced the company to dissolve. in 1890 and, through acquisitions and mergers, came to control virtually the entire American tobacco industry with around 150 factories. Washington Duke and his sons founded the American Tobacco Co. (ticker: X), which remains among the largest steel producers in the world. dominated the steel industry of the late 19th century and became part of the world's first billion-dollar business when it merged with a group of other steel businesses under the name U.S. by eliminating or merging with competitors until 1911, when the Supreme Court determined the company violated the Sherman Antitrust Act, forcing Standard Oil to split into 34 independent companies. and Trust took control of up to 95% of oil production, processing, transportation and marketing in the U.S.

Characteristics of a monopoly economics