Based on the book above write three paragraphs analysis for 4 posts of Other Factors

of Production posts that will focus on the chapters. please focus on the application of economic terms, its relation to your daily life, and how the theory applies to the economy.

15 Monopoly and Antitrust Policy A Monopoly on Lobster Dinners in Maine? A New York Times article written from Stonington, Maine, explained. "Lobsters are flooding the market here." The reporter observed that the huge lobster harvest was not good news for fishermen because "the law of supply red demand has forced the price down to a 40-year low" of $1.35 per pound. Yet shortly after this article app columnist for Slate, an online magazine, had dinner with his lather at the only lobster jury lobster restaurant in Siceington, The Fisherman's Friend. He was surprised that the restaurant charged $20.99 for each dinner. How could The Fisherman's Friend charge so much or a lobster dinner when the price of lobsters was so ow? The answer is that The Fis only seafood restaurant in Stonington. The Slate reporter and his father couldn't eat at "the competitor next door" because there wasn't one. To eat lobster while staying in Stonington, they had to either eat at that restaurant or buy lobsters in a supermarket fact and cook them. In other words, The Fisherman's Friend has a monopoly on selling seafood inners in that town. Although noc common, monopolies are worth study. Few firms in the United States are monopolies because ing because they provide a benchmark for how firms n a market system whenever a firm earns an coocomic behave when they face little or no competition. In this profit, typically ocher firms will enter that market. Therefore, chapter, we will build a model to analyze monopolies. WE it is very difficult for a firm to remain the only provider of a will also discuss government policies toward monopoly. good or service. Only if the gap between the price of lobsters These antitrust policies have been a subject of delane ameen and the price of lobster dimmers in Stonington fails to attract economists and policymakers for more than 100 years. a competitor would The Fisher Friend be able to main- tain its monopoly. (The restaurant was recently renamed the Harbor View Store & Stonecutters Kitchen What to Do With" New York Times, July 28, 2015; and Matthere Viglendon, "The Morsel Prion." ww.shuncom. August 21. 2912. Chapter Outline & Learning Objectives 15.1 Is Any Firm Ever Really a Monopoly? page 508 Define monopoly. Where Do Monopolies Come From? page 610 xplain the four main reasons monopolies carise How Does a Monopoly Choose Price and Output? page 515 explain how a manapoly chooses price and output Does Monopoly Reduce Economic Efficiency? pope 519 graph to Bustrat wa monopoly affects economic efficiency. Government Policy toward Monopoly, page 522 Explain how the government regulates monopoly. Economics in Your Life & Career Can a Business Run from Your Dorm Be a Monopoly? You and your roommate Fatma hear students com- Fatma argues that because your business is a mo- Blaming about the lack ces on campus on nopoly you can charge prices much higher than what Saturday and Sunday evenings, so you come up with local shops charge for subs during the day: hungry stu- an idea for a business: You waitress: You will buy rolls, lunch meat, dents will have to buy your subs or stay hungry until lettuce and tomatoes and become the sole seller of the following da day. You want to make a profit from your business but are not sure whether Fatma is right. Is your those evenings. You believe that there will be many business a monopoly? Should you charge high price hungry customers when students return to campus from for your subs? As you read this chapter, try to answ the library and off-campus events. What price will you these questions You can check your answers against charge for the subs? those we provide on page 530 at the end of this chapter. 507 504 CHAPTER 15 Monopoly and Arttrust Policy Ithough few firms are monopolies, the economic model of monopoly can A e quite useful. As we have seen, even though perfectly competitive markets are rare, the competitive market model provides a benchmark for how a firm acts when it is in an industry. such as farming, with many firms that all supply the same product. Monopoly provides a benchmark for the other extreme, where a firm is the only one in its industry and, therefore, faces no competition from other firms. The monopoly model is also useful in analyzing situation in which firms agree in allike, or not compete, and act together as if they were a monopoly. As we will discuss in this chapter. collusion is illegal in the United States, but it occasionally happens. Monopolies pose a dilemma for the government. Should the government allow monopolies to exist? Are there circumstances in which the government should actually promote the existence of monopolies? Should the government regulate the prices monopo- lies charged In this chapter, we will expl are these public policy issues. Is Any Firm Ever Really a Monopoly? LEARNING OBJECTIVE: Define monopoly. Monopoly A firm that is the only A monopoly is a firm that is the only seller of a good or service that does not have foot have a close substitute. act, are there actually any monopolies? The answer is "yes," provided that the sub- citutes are not "close" substitutes. But how do we decide whether a substitute is a close substitute? A narrow definition of monopoly that some economists use is that a firm has a monopoly if it can ignore the actions of all ocher fir firms. In other ward fa firm can ghere the prices outer firms thatgo. It has a monopoly because other firms must not be producing close substitutes. For example, candles are a subsrity for electric lights, but your local electric company can ignore candle prices because however low the price of candle Bles becomes, almost no customers will will give up using electric lights and switch to candles. Therefore, your local electric company is clearly monopoly. Many economists, however, use a broader definition of manopaly. For example, consider again The Fisherman's Friend restaurant in Stonington, Maine, that we dis- cussed in the chapter opener. Does this restaurant have a monopoly? Substitutes for lobsters dinners certainly exist. If the price of lobster dinners is too high, people will h to eating at a restaurant that serves steak or some off man's Friend d to does not meet the narrow definition of a monopoly. Many economists, wever, would still label the restaurant a monoply. We have seen that when firms earn an economic profit, we can expect new firms to enter the industry, and in the long run, the economic profit is competed away (set Chapter 12. Section 125). The Fisherman's Friend's profit will not be competed away as long as it is the any seller of lobster dinners. A reporter noted, "Stonington & a great place to visit. But it's also a very small town." So, it's possible that no other seafood res- caurants will choose to open in the town. If so, The Fisherman's Friend has a monopoly because there are no other firms selling a substitute close enough that its economic MyLab Economics Shady Poe profit will be competed away. MyLab Economics Comm Onk Apply the Concept MyLab Economics Views Is the NCAA a Monopoly? In 1905, President Theodore Roosevelt was disturbed by the 18 death and many ponics college football players had suffered during the previous season: As hecong discuss rule changes that would make the game safer. This meeting eventually led to the shment of the National Collegiate Athletic Association (NCAA) in 1910. NCAA Is Any Firm Ever Really a Monopoly? 509 rules now govern men's and women's athletics at more than 1,200 institu- tions. On its Web site, the NCAA states, "The National Colle Association is & membership-driven organization dedicated to safeguard ing the well-being of student athletes and equipping them with the skills to onceted on the p economists wonder whether the NCAA's rules might a he Nearly all coleges wompaims that the ctively a monopoly. Nearly all co ms to participa