Lectures_1-2_monopoly

Common misconceptions and comments (cont.)

I Monopoly does not have a supply curve!!

ISupply curve is given by p = MC

IBut this is NOT how monopoly operates

IGraphs are often drawn for a ‡at marginal cost curve but same logic works for an increasing marginal cost

IMonopoly is generally bad for welfare but

INatural monopoly

IPerfectly price discriminating monopoly (same welfare as the competitive outcome)

IPatents (good for R&D incentives at least up to some level)

IEven in these cases there are important dynamic ine¢ ciencies

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