Chapter 15: Monopoly

Chapter 15 is all about monopolies and their impact on the market and the economy. For starters, monopolies are not price takers, they are price makers. Since monopolies control a the main supply of a particular good, they are able to change the price of the good in order to maximize their own profit. In order for a market to be considered a monopoly, they must have a key resource owned by a single firm, the government gives a single firm the exclusive right to produce some goof or service, and the costs of production make a single producer more efficient than a large number of producers. In addition, when discussing the types of goods in a market in a previous chapter, government created monopolies are called natural monopolies. Natural monopolies included services such as water or electrical supply since the cost of a single firm to produce for the entire demand is less expensive for the consumers than having two or more supply firms.  It is also crucial to remember that that for a monopoly firm, the price must be greater that than the marginal cost and the marginal revenue, and that the profit created by monopolies create a deadweight loss. The government has some ways to control the power of a monopoly such as increasing competition, regulation, turning companies into public enterprises, or by simply doing nothing at all. By doing so, the monopoly will still have power but not too much and that will reduce the price discrimination. Overall, I think it was a long chapter to read and I would give it a rating of 2. I would however like a better understanding of the graphs.