【经济课件】Ch10 MARKET POWER MONOPOLY AND MONOPSONY

1、p pa ar rt t i ii ii i mma ar rk ke et t s st tr ruuc ct tuur re e a annd d c co ommp pe et ti it tv ve e s st tr ra at te eg gy y c chha ap pt te er r 1 10 0 mma ar rk ke et t p po owwe er r: : mmo onno op po ol ly y a annd d mmo onno op ps so onny y t te ea ac chhi inng g nno ot te es s this chapt

2、er covers both monopoly and monopsony in order to highlight the similarity between the two types of market power. the chapter begins with a discussion of monopoly in sections 1-4. section 5 first discusses monopsony, and then offers an instructive comparison of monopoly and monopsony. section 6 disc

3、usses sources of monopsony power and the social costs of monopsony power, while section 7 concludes with a discussion of antitrust law. if you are pressed for time you might choose to only cover the first four sections on monopoly and skip the remainder of the chapter. section 7 can be covered even

4、if you choose to skip sections 5 and 6. the last part of section 1 on the multiplant firm can also be skipped if you are pressed for time. although chapter 8 presented the general rule for profit maximization, you should review marginal revenue and price elasticity of demand through a careful deriva

5、tion of equation 10.1. a discussion of the derivation of equation 10.1 will elucidate the geometry of figure 10.3. point out that because marginal revenue is positive at the profit maximizing level of price and quantity for a monopolist, demand at that quantity is elastic. equation 10.1 also leads d

6、irectly to the lerner index in section 10.2. this provides fruitful ground for a discussion of a monopolists market power. for example, if ed is large (e.g., because of close substitutes), then (1) the demand curve is relatively flat, (2) the marginal revenue curve is relatively flat (although steep

7、er than the demand curve), and (3) the monopolist has little power to raise price above marginal cost. to reinforce these points, introduce a non-linear demand curve by, for example, showing the location of the marginal revenue curve for a unit-elastic demand curve. once this concept has been clearl

8、y presented, the discussion of the effect of an excise tax on a monopolist with non-linear demand (figure 10.5) will not seem out of place. the social costs of market power are a good topic for class discussion, and this topic can be introduced by comparing the deadweight loss associated with monopo

9、ly with the analysis of market intervention given in chapter 9. for example, compare figure 10.10 with figure 9.5. given that exercises (9), (13), and (15) involve “kinked marginal revenue curves,” you should present figure 10.11 if you plan to assign those problems. although figure 10.11 is complic

10、ated, exposure to it here will help when it reappears in chapter 12. r re ev vi ie eww q quue es st ti io onns s 1 1. . a a mmo on no op po ol li is st t i is s p pr ro od du uc ci in ng g a at t a a p po oi in nt t a at t w wh hi ic ch h mma ar rg gi in na al l c co os st t e ex xc ce ee ed ds s mm

11、a ar rg gi in na al l r re ev ve en nu ue e. . hho ow w s sh ho ou ul ld d i it t a ad dj ju us st t i it ts s o ou ut tp pu ut t t to o i in nc cr re ea as se e p pr ro of fi it t? ? when marginal cost is greater than marginal revenue, the incremental cost of the last unit produced is greater than

12、incremental revenue. the firm would increase its profit by not producing the last unit. it should continue to reduce production, thereby decreasing marginal cost and increasing marginal revenue, until marginal cost is equal to marginal revenue. 2 2. . wwe e w wr ri it te e t th he e p pe er rc ce en

13、 nt ta ag ge e mma ar rk ku up p o of f p pr ri ic ce es s o ov ve er r mma ar rg gi in na al l c co os st t a as s ( (p p - - mmc c) )/ /p p. . f fo or r a a p pr ro of fi it t- - mma ax xi immi iz zi in ng g mmo on no op po ol li is st t, , h ho ow w d do oe es s t th hi is s mma ar rk ku up p d d

14、e ep pe en nd d o on n t th he e e el la as st ti ic ci it ty y o of f d de emma an nd d? ? wwh hy y c ca an n t th hi is s mma ar rk ku up p b be e v vi ie ew we ed d a as s a a mme ea as su ur re e o of f mmo on no op po ol ly y p po ow we er r? ? we can show that this measure of market power is e

15、qual to the negative inverse of the price elasticity of demand. pmc ped 1 the equation implies that, as the elasticity increases (demand becomes more elastic), the inverse of elasticity decreases and the measure of market power decreases. therefore, as elasticity increases (decreases), the firm has

16、less (more) power to increase price above marginal cost. 3 3. . wwh hy y i is s t th he er re e n no o mma ar rk ke et t s su up pp pl ly y c cu ur rv ve e u un nd de er r c co on nd di it ti io on ns s o of f mmo on no op po ol ly y? ? the monopolists output decision depends not only on marginal co

17、st, but also on the demand curve. shifts in demand do not trace out a series of prices and quantities that we can identify as the supply curve for the firm. instead, shifts in demand lead to changes in price, output, or both. thus, there is no one-to-one correspondence between the price and the sell

18、ers quantity; therefore, a monopolized market lacks a supply curve. 4 4. . wwh hy y mmi ig gh ht t a a f fi ir rmm h ha av ve e mmo on no op po ol ly y p po ow we er r e ev ve en n i if f i it t i is s n no ot t t th he e o on nl ly y p pr ro od du uc ce er r i in n t th he e mma ar rk ke et t? ? th

19、e degree of monopoly (or market) power enjoyed by a firm depends on the elasticity of the demand curve that it faces. as the elasticity of demand increases, i.e., as the demand curve becomes flatter, the inverse of the elasticity approaches zero and the monopoly power of the firm decreases. thus, if

20、 the firms demand curve has any elasticity less than infinity, the firm has some monopoly power. it is only the competitive firm that faces a horizontal demand curve who has no market power. 5 5. . wwh ha at t a ar re e s so omme e o of f t th he e d di if ff fe er re en nt t t ty yp pe es s o of f

21、b ba ar rr ri ie er rs s t to o e en nt tr ry y t th ha at t g gi iv ve e r ri is se e t to o mmo on no op po ol ly y p po ow we er r? ? g gi iv ve e a an n e ex xa ammp pl le e o of f e ea ac ch h. . the firms ability to exercise monopoly power depends on how easy it is for other firms to enter the

22、 industry. there are several barriers to entry, including exclusive rights (e.g., patents, copyrights, and licenses) and economies of scale. these two barriers to entry are the most common. exclusive rights are legally granted property rights to produce or distribute a good or service. positive econ

23、omies of scale lead to “natural monopolies” because the largest producer can charge a lower price, driving competition from the market. for example, in the production of aluminum, there is evidence to suggest that there are scale economies in the conversion of bauxite to alumina. (see u.s. v. alumin

24、um company of america, 148 f.2d 416 1945, discussed in exercise 8, below.) 6 6. . wwh ha at t f fa ac ct to or rs s d de et te er rmmi in ne e t th he e a ammo ou un nt t o of f mmo on no op po ol ly y p po ow we er r a an n i in nd di iv vi id du ua al l f fi ir rmm i is s l li ik ke el ly y t to o

25、 h ha av ve e? ? e ex xp pl la ai in n e ea ac ch h o on ne e b br ri ie ef fl ly y. . three factors determine the firms elasticity of demand: (1) the elasticity of market demand, (2) the number of firms in the market, and (3) interaction among the firms in the market. the elasticity of market deman

26、d depends on the uniqueness of the product, i.e., how easy it is for consumers to substitute away from the product. as the number of firms in the market increases, the demand elasticity facing each firm increases because customers may shift to the firms competitors. the number of firms in the market

27、 is determined by how easy it is to enter the industry (the height of barriers to entry). finally, the ability to raise the price above marginal cost depends on how other firms react to the firms price changes. if other firms match price changes, customers will have little incentive to switch to ano

28、ther supplier. 7 7. . wwh hy y i is s t th he er re e a a s so oc ci ia al l c co os st t t to o mmo on no op po ol ly y p po ow we er r? ? i if f t th he e g ga ai in ns s t to o p pr ro od du uc ce er rs s f fr ro omm mmo on no op po ol ly y p po ow we er r c co ou ul ld d b be e r re ed di is st

29、tr ri ib bu ut te ed d t to o c co on ns su umme er rs s, , w wo ou ul ld d t th he e s so oc ci ia al l c co os st t o of f mmo on no op po ol ly y p po ow we er r b be e e el li immi in na at te ed d? ? e ex xp pl la ai in n b br ri ie ef fl ly y. . when the firm exploits its monopoly power by cha

30、rging a price above marginal cost, consumers buy less at the higher price. consumers enjoy less surplus, the difference between the price they are willing to pay and the market price on each unit consumed. some of the lost consumer surplus is not captured by the seller and is a deadweight loss to so

31、ciety. therefore, if the gains to producers were redistributed to consumers, society would still suffer the deadweight loss. 8 8. . wwh hy y w wi il ll l a a mmo on no op po ol li is st t s s o ou ut tp pu ut t i in nc cr re ea as se e i if f t th he e g go ov ve er rn nmme en nt t f fo or rc ce es

32、s i it t t to o l lo ow we er r i it ts s p pr ri ic ce e? ? i if f t th he e g go ov ve er rn nmme en nt t w wa an nt ts s t to o s se et t a a p pr ri ic ce e c ce ei il li in ng g t th ha at t mma ax xi immi iz ze es s t th he e mmo on no op po ol li is st t s s o ou ut tp pu ut t, , w wh ha at t

33、 p pr ri ic ce e s sh ho ou ul ld d i it t s se et t? ? by restricting price to be below the monopolists profit-maximizing price, the government can change the shape of the firms marginal revenue, mr, curve. when a price ceiling is imposed, mr is equal to the price ceiling for all quantities lower t

34、han the quantity demanded at the price ceiling. if the government wants to maximize output, it should set a price equal to marginal cost, or in other words set price at the point where the demand curve and the marginal cost curve intersect. prices below this level induce the firm to decrease product

35、ion, assuming the marginal cost curve is upward sloping. the regulators problem is to determine the shape of the monopolists marginal cost curve. this task is difficult given the monopolists incentive to hide or distort this information. 9 9. . hho ow w s sh ho ou ul ld d a a mmo on no op ps so on n

36、i is st t d de ec ci id de e h ho ow w mmu uc ch h o of f a a p pr ro od du uc ct t t to o b bu uy y? ? wwi il ll l i it t b bu uy y mmo or re e o or r l le es ss s t th ha an n a a c co ommp pe et ti it ti iv ve e b bu uy ye er r? ? e ex xp pl la ai in n b br ri ie ef fl ly y. . the marginal expend

37、iture is the change in the total expenditure as the purchased quantity changes. for a firm competing with many firms for inputs, the marginal expenditure is equal to the average expenditure (price). for a monopsonist, the marginal expenditure curve lies above the average expenditure curve because th

38、e decision to buy an extra unit raises the price that must be paid for all units, including the last unit. all firms should buy inputs so that the marginal value of the last unit is equal to the marginal expenditure on that unit. this is true for both the competitive buyer and the monopsonist. howev

39、er, because the monopsonists marginal expenditure curve lies above the average expenditure curve and because the marginal value curve is downward sloping, the monopsonist buys less than a firm would buy in a competitive market. 1 10 0. . wwh ha at t i is s mme ea an nt t b by y t th he e t te er rmm

40、 “ “mmo on no op ps so on ny y p po ow we er r” ”? ? wwh hy y mmi ig gh ht t a a f fi ir rmm h ha av ve e mmo on no op ps so on ny y p po ow we er r e ev ve en n i if f i it t i is s n no ot t t th he e o on nl ly y b bu uy ye er r i in n t th he e mma ar rk ke et t? ? monopsony power refers to the

41、buyers ability to affect the price of a good. this power enables the buyer to purchase the good for a lower price, as compared to a competitive factor market. any buyer facing an upward-sloping factor supply curve has some monopsony power. in a competitive market, the seller faces a perfectly-elasti

42、c market demand curve and the buyer faces a perfectly-elastic market supply curve. thus, any characteristic of the market (e.g., when there are a small number of buyers or if buyers engage in collusive behavior) that leads to a less-than-perfectly-elastic supply curve gives the buyer some monopsony

43、power. 1 11 1. . wwh ha at t a ar re e s so omme e s so ou ur rc ce es s o of f mmo on no op ps so on ny y p po ow we er r? ? wwh ha at t d de et te er rmmi in ne es s t th he e a ammo ou un nt t o of f mmo on no op ps so on ny y p po ow we er r a an n i in nd di iv vi id du ua al l f fi ir rmm i is

44、 s l li ik ke el ly y t to o h ha av ve e? ? the individual firms monopsony power depends on the characteristics of the “buying- side” of the market. there are three characteristics that enhance monopsony power: (1) the elasticity of market supply, (2) the number of buyers, and (3) how the buyers in

45、teract. first, if market supply is very inelastic, then the buyer will enjoy more monopsony power. when supply is very elastic, marginal expenditure and average expenditure do not differ by much, so price will be closer to the competitive price. second, the fewer the number of buyers, the greater th

46、e monopsony power. third, if buyers are able to collude and/or they do not compete very aggressively with each other then each will enjoy more monopsony power. 1 12 2. . wwh hy y i is s t th he er re e a a s so oc ci ia al l c co os st t t to o mmo on no op ps so on ny y p po ow we er r? ? i if f t

47、th he e g ga ai in ns s t to o b bu uy ye er rs s f fr ro omm mmo on no op ps so on ny y p po ow we er r c co ou ul ld d b be e r re ed di is st tr ri ib bu ut te ed d t to o s se el ll le er rs s, , w wo ou ul ld d t th he e s so oc ci ia al l c co os st t o of f mmo on no op ps so on ny y p po ow

48、we er r b be e e el li immi in na at te ed d? ? e ex xp pl la ai in n b br ri ie ef fl ly y. . with monopsony power, the price is lower and the quantity is less than under competitive buying conditions. because of the lower price and reduced sales, sellers lose revenue. only part of this lost revenu

49、e is transferred to the buyer as consumer surplus, and the net loss in total surplus is deadweight loss. even if the consumer surplus could be redistributed to sellers, the deadweight loss persists. this inefficiency will remain because quantity is reduced below the level where price is equal to mar

50、ginal cost. 1 13 3. . hho ow w d do o t th he e a an nt ti it tr ru us st t l la aw ws s l li immi it t mma ar rk ke et t p po ow we er r i in n t th he e uun ni it te ed d s st ta at te es s? ? g gi iv ve e e ex xa ammp pl le es s o of f mma aj jo or r p pr ro ov vi is si io on ns s o of f t th he

51、e l la aw ws s. . antitrust laws, which are subject to interpretation by the courts, limit market power by proscribing a firms behavior in attempting to maximize profit. section 1 of the sherman act prohibits every restraint of trade, including any attempt to fix prices by buyers or sellers. section

52、 2 of the sherman act prohibits behavior that leads to monopolization. the clayton act, with the robinson-patman act, prohibits price discrimination and exclusive dealing (sellers prohibiting buyers from buying goods from other sellers). the clayton act also limits mergers when they could substantia

53、lly lessen competition. the federal trade commission act makes it illegal to use unfair or deceptive practices. 1 14 4. . e ex xp pl la ai in n b br ri ie ef fl ly y h ho ow w t th he e uu. .s s. . a an nt ti it tr ru us st t l la aw ws s a ar re e a ac ct tu ua al ll ly y e en nf fo or rc ce ed d.

54、. antitrust laws are enforced in three ways: (1) through the antitrust division of the justice department, whenever firms violate federal statutes, (2) through the federal trade commission, whenever firms violate the federal trade commission act, and (3) through civil suits. the justice department c

55、an seek to impose fines or jail terms on managers or owners involved or seek to reorganize the firm, as it did in its case against a.t. price should then be set so that: p = mc 1 2 = 2mc therefore, if mc rises by 25 percent, then price will also rise by 25 percent. when mc = $20, p = $40. when mc ri

56、ses to $20(1.25) = $25, the price rises to $50, a 25 percent increase. 4 4. . a a f fi ir rmm f fa ac ce es s t th he e f fo ol ll lo ow wi in ng g a av ve er ra ag ge e r re ev ve en nu ue e ( (d de emma an nd d) ) c cu ur rv ve e: : p p = = 1 12 20 0 - - 0 0. .0 02 2q q w wh he er re e q q i is s

57、w we ee ek kl ly y p pr ro od du uc ct ti io on n a an nd d p p i is s p pr ri ic ce e, , mme ea as su ur re ed d i in n c ce en nt ts s p pe er r u un ni it t. . t th he e f fi ir rmm s s c co os st t f fu un nc ct ti io on n i is s g gi iv ve en n b by y c c = = 6 60 0q q + + 2 25 5, ,0 00 00 0. .

58、 a as ss su umme e t th ha at t t th he e f fi ir rmm mma ax xi immi iz ze es s p pr ro of fi it ts s. . a a. .wwh ha at t i is s t th he e l le ev ve el l o of f p pr ro od du uc ct ti io on n, , p pr ri ic ce e, , a an nd d t to ot ta al l p pr ro of fi it t p pe er r w we ee ek k? ? the profit-ma

59、ximizing output is found by setting marginal revenue equal to marginal cost. given a linear demand curve in inverse form, p = 120 - 0.02q, we know that the marginal revenue curve will have twice the slope of the demand curve. thus, the marginal revenue curve for the firm is mr = 120 - 0.04q. margina

60、l cost is simply the slope of the total cost curve. the slope of tc = 60q + 25,000 is 60, so mc equals 60. setting mr = mc to determine the profit-maximizing quantity: 120 - 0.04q = 60, or q = 1,500. substituting the profit-maximizing quantity into the inverse demand function to determine the price: