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Micro economics and Monopolies

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Micro economics and Monopolies

Post by sujin007 on Thu Dec 06, 2012 3:45 pm

Microeconomists see monopolies and other market failures as undesirable and highly inefficient ways to allocate resources in an economy.

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Re: Micro economics and Monopolies

Post by sujin007 on Thu Dec 06, 2012 3:49 pm

For instance, a monopoly can choose to charge a higher-than-market-value price for its product because no competition exists that can force it to do otherwise.

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Re: Micro economics and Monopolies

Post by sujin007 on Thu Dec 06, 2012 3:52 pm

Consumers who are charged an unfair price are unable to maximize their utility and satisfy demand, either because the product is too expensive for most to afford..

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Re: Micro economics and Monopolies

Post by sujin007 on Thu Dec 06, 2012 3:54 pm

If the monopoly’s product is a necessary one, like water or gasoline, consumers may be forced to negatively alter their spending habits to buy it, putting strain on other areas of the economy.

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Re: Micro economics and Monopolies

Post by sujin007 on Thu Dec 06, 2012 3:56 pm

Furthermore, a business that has a monopoly on a limited resource may misuse or deplete the resource, damaging both the environment and the economy.

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Re: Micro economics and Monopolies

Post by sujin007 on Thu Dec 06, 2012 3:57 pm

Consumers must forgo purchasing other products. Other kinds of market failure include information asymmetry, missing markets and externalities.

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