# Intermediate Microeconomics

## 8. Monopoly

A monopoly is the sole seller of a good that does not have close substities. As a result, the demand curve facing a monopolist is the market demand curve, which is downward sloping. Thus, the monopoly is able to set its price. A monopolist charges a price that exceeds their marginal cost, which differs from a firm in a competitive market. The higher price charged results in a reduction in trades between buyers and sellers that would, under perfect competition, be desirable for both parties. In the Screencasts/Pencasts for this topic, particular aspects of monopolistic markets are covered, including profit maximization, market power, how the extent of market power depends on the elasticity of demand, how taxes affect outcomes in markets controlled by a monopoly, the welfare effects of monopolies, natural monopolies, and policies designed to combat the harm caused by monopoly power.

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## Basics of MonopolyThis Screencast discusses monopolistic firms, why monopolies arise, the ability of a monopoly to set prices, and the welfare consequences of monopoly power. |

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## Profit MaximizationThis Pencast presents the monopoly’s profit function and the necessary and sufficient conditions for profit maximization. |

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## Marginal RevenueThis Pencast shows how to derive a function for a monopoly’s marginal revenue curve. An applied example is provided. |

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## Marginal Revenue and ElasticityThis Pencast illustrates that a monopoly’s marginal revenue function depends on the elasticity of demand. An applied example shows that a monopoly always sets its price on the elastic portion of a linear demand curve. |

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## Applied Example of Profit MaximizationThis Pencast provides an applied problem to illustrate how a monopoly firm chooses its output, sets its price and calculates its profit. |

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## Graph of Profit MaximizationThis Pencast shows how to graph the demand, marginal revenue, marginal cost, average variable cost, and marginal cost curves using the explicit functions from the previous Pencast. |

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## Market PowerThis Pencast illustrates that a monopoly’s market power, i.e. its ability to charge a price above marginal cost, depends solely on the elasticity of demand. It is shown, using the monopoly price and marginal cost from previous Pencasts, how to compute the elasticity of demand and the monopoly equilibrium. |

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## Lerner IndexThis Pencast illustrates how to derived the Lerner Index, a measure of the market power. |

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## Learner Index: Interpretation and ApplicationThis Pencast provides the intuition behind the Lerner Index and an application of it. |

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## Monopoly and WelfareThis Pencast uses the tool of welfare accounting to demonstrate the inefficiency caused by monopolists. |

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## Effects of a Per-Unit TaxThis Pencast illustrates how a per-unit tax imposed on a monopolist affects the quantity sold and the price charged. |

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## Effects of a Per-Unit Tax: A Numerical ExampleThis Pencast uses explicit form functions to how a per-unit tax affects the quantity sold and the price charged. |

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## Tax IncidenceThis Pencast uses a constant elasticity demand curve to show that a per-unit tax imposed on a monopoly can result in an increase in price that exceeds the size of the tax. |

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## Natural Monopoly: Basics and Cost CurvesThis Pencast provides an illustration of a hypothetical natural monopoly's cost curves. |

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## Natural Monopoly: Competition Increases CostsThis Pencast shows how introducing competition into a market controlled by a natural monopoly increases the costs of production. |

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## Price Regulation: Traditional MonopoliesThis Pencast illustrates graphically how optimal price regulation affects the market outcome. |

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## Price Regulation: Natural MonopoliesThis Pencast illustrates graphically how optimal price regulation affects the market outcome. Problems arise due to the nature of the natural monopoly’s costs, which make imposing marginal-cost pricing difficult. |