INTRODUCTION
Today we will continue to study monopoly by looking at two special cases of monopoly. In natural monopoly the government faces the problem of how to regulate a monopoly, when breaking it up would be inefficient. We will also learn about the effects on a market, when a monopolist price discriminates. You should read the text chapter identified below in the homework section, watch the related videos for help in understanding this material, do the activities identified, in the homework section and be prepared for the Problem of the Day. This page contains all the information you need for today's class. Use the table of contents on the right to help you navigate.
Read Mankiw (Chapter 15).
Watch this video.
Khan Academy
Problem of the Day: You will work cooperatively with your partner to construct a response to the following prompt.
Assume the apple industry is a pure monopoly.
Identify the rule used by the monopolist to determine the quantity he/she produces. Draw a diagram in which you show each of the following in this market: Price, quantity, monopoly profit.
Also, contrast equilibrium price and output in monopoly with perfect competition by showing on your graph from (1) the price and quantity that would have occurred in a perfectly competitive apple market. Then explain in words how they differ.
Is this industry allocatively and productively efficient? Use your diagram to explain.
Lecture
Natural Monopoly and Price Discrimination in Monopoly
Related Readings