Chapter 15

Whereas last chapter was all about the price takers and perfectly competitive markets, chapter 15 is all about price makers and monopolies. The introduction provides a clear, if a bit outdated example of Microsoft having a monopoly on the Windows operating system. A key concept, introduced early, that separates perfectly competitive markets from monopolies are barriers to entry. These fall into three categories, monopoly resources, government regulation, and the production process. We had already talked a little bit about government regulation in the form of patents and copyrights, but thinking about specific examples like authors and pharmaceutical companies helped drive home the point. Natural monopolies also received a better definition in this chapter, and we learned that something like a bridge can be a natural monopoly because as more and more people use the bridge, the average total cost goes down because marginal cost in negligible. One important thing to remember is that for a monopoly, marginal revenue is not the same for each additional unit of output. A monopolist's marginal revenue is always less than the price of the good. Obviously, the lower the price, the more that is sold, increasing total revenue, but the price is lower, so it decreases total revenue. To maximize revenue for a monopolistic corporation, you need to determine where the marginal revenue curve and the marginal cost curve intersect. Overall, this chapter was okay in terms of difficulty. I would rate it a 2/3.