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This lecture covers the material found in Chapter 12 of Case and Fair, Principles of Economics, 7/e. In the last lecture, we extolled the virtues of perfectly competitive markets but concluded with the realization that very few markets are perfectly competitive. One of the ways in which a market can become less competitive is when there are not sufficient numbers of buyers and sellers. This chapter explores the market condition of a sole seller with many buyers. We will examine how a monopolist maximizes profits and chooses a price/quantity combination. We will also evaluate the efficiency of monopolistic markets and determine how to measure the social cost of monopolies. We will examine how the government deals with imperfectly competitive markets and will see the evolution of antitrust policy. By the end of this chapter, you should be able to answer the following questions: 1. What distinguishes a pure monopoly from a perfectly competitive firm? 2. Are all barriers to entry legal restrictions? 3. How do market and firm demand curves differ for monopolists? 4. Can a monopolist charge any price that it wants? 5. How does a monopolist maximize profits? 6. Why does a monopolist not have a supply curve? 7. Is a monopoly efficient, and why? 8. What is the difference between rent-seeking and profit-seeking? 9. Are there any monopolies that have social benefits? 10. What was the Sherman Act and how does it prevent imperfectly competitive markets? 11. What is the importance of the Alcoa case? 12. What are the potential punishments that the government can impose on violators of antitrust law? 13. Are the recent regulatory trends towards more regulation or less regulation? Why?
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