Econ question about monopoly
- Thread starter DaWhim
- Start date
"no, because the definition of a monopoly price is one that yields monopoly profits"
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not really. monopoly has nothing to do with profits.
monopolies are just as likely, or maybe more likely, to become bloated and waste money as non-monopolies.
and they can also price themselves out of the market, just about any product or service has competition, if the price is right.
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not really. monopoly has nothing to do with profits.
monopolies are just as likely, or maybe more likely, to become bloated and waste money as non-monopolies.
and they can also price themselves out of the market, just about any product or service has competition, if the price is right.
I suppose it could if a govt regulated a natural monopoly so that it made no profit... but then the firm would probably exit the market
iversonyin
Diamond Member
- Aug 12, 2004
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No you want to max all your properties out with four houses each, using most of the available house pieces creating a housing shortage thus denying your opponent houses to get income with.
Is there really a monopoly price?
People seem to think a monopoly can charge any price they want. They can to a degree, but theyt still have to go based on the Demand and Supply curve. And the elasticity of demand, if no one will buy it at a certain price they won't be making anything.
Monopolies by definition produce ineffieciently. They don't go by the MR=MC idea. Regardless, I don't think there is a "monopoly price."
I am probably wrong though.
People seem to think a monopoly can charge any price they want. They can to a degree, but theyt still have to go based on the Demand and Supply curve. And the elasticity of demand, if no one will buy it at a certain price they won't be making anything.
Monopolies by definition produce ineffieciently. They don't go by the MR=MC idea. Regardless, I don't think there is a "monopoly price."
I am probably wrong though.
monopoly charges MR = MC. At this point, they are milking max. profit. They're making a profit no matter what.
A natural monopoly can be as simple as a small town grocery store. If there is one grocery store and another comes in, then they both go out of business. There is not enough demand for grocercies in that small town, thus a natual monopoly is the only option. One grocery store.
I am sure that has happened at some point in history, where demand for an good/service doesn't warrant more than one firm.
Vic
Elite Member
- Jun 12, 2001
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No, you're right. Not only does a monopoly have to take supply and demand into account (lest they price their own product out of demand), but if (due to their own inefficiencies) they have high prices and high profits, then they will encourage investment capital to make market entry, creating their own competition.
A "natural" monopoly can only exist and profit through low costs and low prices.
I think that depends on the monopolies power in the market. As they can stretch that and produce where they choose if the elasticity of demand is less than one.
Vic
Elite Member
- Jun 12, 2001
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Only if that one grocery store kept its prices low enough to discourage competitive market entry. Because if there is only one and another comes in, and the town can only support one, they won't both go out of business, just one of them will (if they both did, then a 3rd would enter).
But in a small town in the middle of nowhere, that could mean some relatively high prices, but still... it's not like anyone is forced to live in a small town, and small town lovers know that higher prices and reduced services are just part of living in one.
Good point. If one lowers its prices too much it could reach its shutdown point. Either way, one is winning.
My point is that sometimes market demand cannot support more than one firm, creating a natural monopoly as only one firm can exist.
Regardless of the power, wouldn't they produce for max profit? Also, wouldn't they produce as close to unit elastic as possible?
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