# Tag Info

27

This is known as dividing markets or market allocation, and it is against the law in the US, the EU, and I imagine in most countries with antitrust laws.

3

There is one universal "solution" to monopolism without government intervention. Just allow the monopoly to do its worst. It will give very strong incentives to find ways to satisfy needs of potential clients of the monopoly in ways that would diminish market force of the monopoly. Basically it's bet that human creativity will eventually tame (or even kill) ...

3

Demand schedule is a table that gives you the quantity demanded at different prices. An example of demand schedule that I found on Wikipedia is shown below: Demand curve is a curve that plots the demand at different prices in the 2D space defined by $Q$ and $P$ (see example picture I took from investopedia below). Demand curve is essentially a plot of ...

3

In this post, we find that the optimal monopoly price can be written as $$P^* = \frac {|\eta|}{|\eta|-1} MC$$ where $\eta$ is the elasticity of demand with respect to price, and so optimal price will necessarily be at a point where $\eta$ is higher than unity in absolute terms. From this one can deduce some unambiguous and some ambiguous scenarios when ...

2

Would you consider something like Apple Records vs Apple Computer (https://en.wikipedia.org/wiki/Apple_Corps_v_Apple_Computer) to be a non-compete? There were legal battles over trademark, and early on "As a condition of the settlement, Apple Computer agreed not to enter the music business, and Apple Corps agreed not to enter the computer business." This was ...

2

Real life is more complicated than that. For example Companies A and B might be competing in the same market sector, but then collaborate on producing a new product aimed at a particular niche in the market. It is quite likely the legal agreement for the collaboration will state that neither company will individually develop or market a product to compete ...

2

Natural monopolies may exist because the cost structure is such that the market could not sustain two firms. This is usually explained by large sunk costs and relatively small demand - if there were two firms the average cost for at least one would have to be above the equilibrium price. If there are no sunk costs at all - as set forth in the ideal case of a ...

1

Hint. The following are the necessary conditions for profit maximization: Monopoly with 1 plant and 1 market: $MR = MC$ Monopoly with 1 plant and 2 markets: $MR_1=MR_2=MC$ Monopoly with 2 plants and 1 market: $MR = MC_1=MC_2$ I'll let you figure out the rest.

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Economic (not just monopoly) rent is what is otherwise known as produces surplus. And producer surplus is related to profit via $$\text{Producer Surplus}=\text{Profit}+\text{Fixed Cost}$$ assuming that fixed cost is sunk.

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Leaving aside the cases of platform markets and other externalities and natural monopolies, what people who have no training in economics usually miss is question of the size of the market. It may very well be that there is enough demand for only one company to be profitable with the available technology. If a second company attempted to enter the market, it ...

1

Price minus marginal cost gives you marginal profit. \begin{align*} \text{Total profit}&=\text{Revenue}-\text{Total cost}\\ \frac{\text{Total profit}}{\text{Quantity}}&=\frac{\text{Revenue}-\text{Total cost}}{{\text{Quantity}}}\\ &=\frac{\text{Revenue}}{{\text{Quantity}}} - \frac{\text{Total cost}}{{\text{Quantity}}}\\\\ \text{Per-unit profit}&...

1

Both of them are consistent. The economic profit is the total revenue $TR$ minus total cost $TC$ but in economics costs must include also opportunity costs not just accounting ones. However, for all standard market structures $TR>TC$ happens only if the marginal revenue or price $P$ is above marginal costs $MC$. Also if there is positive economic ...

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