Overview MJM Foodie gives an overview of how a monopoly operates. Irene has also produced a video explaining monopolies. (Note that the D and MR curve should really start at the same point on her graphs. She's also keen for us to see some of her favourite snaps at the end). Building different graphs for different monopoly scenarios Now that you have understood the economics above, you should be able to test your understanding using the following presentation. Explore this interactive presentation by Reffonomics: Original file can be accessed from here (listed as Monopoly, I): http://www.reffonomics.com/TRB/INPROGRESS/Microeconomicsindex.html Monopoly and Efficiency Explore this interactive presentation by Reffonomics. Original file accessed from here (listed as Monopoly Interactive, II): http://www.reffonomics.com/TRB/INPROGRESS/Microeconomicsindex.html Are monopolies bad? A common line of question within IB Economics is to compare the relative advantages and disadvantages of firms in perfect competition and monopoly market structures (remembering that these are theoretical extremes of the market structure continuum). One common assumption is that monopolies are bad (due to largely to their inefficiency - see the Types of Efficiency page to recap what efficiency is). This Reffonomics tutorial recaps the efficicency of perfect competition compared to the inefficiency of monopoly situation. Richard McKenzie emphasises further why monopolies are inefficient: The point about deadweight loss is an important one and represents inefficiency (as consumer and producer surplus are effectively lost. As they are not maximised, Pareto efficiency is not achieved). See a further explanation below (produced by johnbernke): PAJ Holden puts forward an argument that monopolies might not always be 'bad'. See the youtube video on the following link: http://www.youtube.com/watch?v=qdRGUaTHVig Here is a possible IB Paper 2 (HL) question with an outline of a suggested answer (click on each image to see the original at full size). Note the reference to dynamic efficiency which can be a feature of monopolies. Page 1  Page 2  Natural Monopolies This Reffonomics tutorial explains what a Natural Monopoly is and how they differ from other monopolies. (Note: some of the explanataion assumes an understanding of price discrimination - first, second and third degree price discrimination, although you can still understand the main ideas without this understanding) Original file accessed from here (listed as Natural Monopoly): http://www.reffonomics.com/TRB/INPROGRESS/Microeconomicsindex.html MJM Foodie on how governments regulate natural monopolies: |