by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a Legal Monopoly? For some products, the government erects barriers to entry by prohibiting or limiting competition. Under U.S. law, no organization but the U.S. Postal Service is legally allowed to deliver first-class mail. Many states or cities have laws or...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How Does Intellectual Property Promote Innovation? Innovation takes time and resources to achieve. Suppose a company invests in research and development and finds the cure for the common cold. In this world of near ubiquitous information, other companies could take...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How Do Monopolists Set Price with the Demand Curve? A perfectly competitive firm acts as a price taker, so we calculate total revenue taking the given market price and multiplying it by the quantity of output that the firm chooses. A flat perceived demand curve means...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Total Cost and Total Revenue for a Monopolist? The total cost curve has its typical shape – total costs rise and the curve grows steeper as output increases. Low levels of output bring in relatively little total revenue, because the quantity is low....
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Marginal Revenue and Marginal Cost for a Monopolist? In the real world, a monopolist often does not have enough information to analyze its entire total revenues or total costs curves. After all, the firm does not know exactly what would happen if it were to...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
Why is a Monopoly Inefficient? Most people criticize monopolies because they charge too high a price, but what economists object to is that monopolies do not supply enough output to be allocatively efficient. To understand why a monopoly is inefficient, it is useful...
