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Although a regulated monopoly will not have a monopoly profit that is high as it would be in an unregulated situation, it still can have an economic profit that is still above what a competitive firm has in a truly competitive market. [2] Government regulations of the price the monopoly can charge reduce the monopoly profit, but do not ...
In economics, a government-granted monopoly (also called a "de jure monopoly" or "regulated monopoly") is a form of coercive monopoly by which a government grants exclusive privilege to a private individual or firm to be the sole provider of a good or service; potential competitors are excluded from the market by law, regulation, or other mechanisms of government enforcement.
The Ramsey problem, or Ramsey pricing, or Ramsey–Boiteux pricing, is a second-best policy problem concerning what prices a public monopoly should charge for the various products it sells in order to maximize social welfare (the sum of producer and consumer surplus) while earning enough revenue to cover its fixed costs.
The company is able to collect a price based on the average revenue (AR) curve. The difference between the company's average revenue and average cost, multiplied by the quantity sold (Qs), gives the total profit. A short-run monopolistic competition equilibrium graph has the same properties of a monopoly equilibrium graph.
A government-granted monopoly or legal monopoly, by contrast, is sanctioned by the state, often to provide an incentive to invest in a risky venture or enrich a domestic interest group. Patents, copyrights, and trademarks are sometimes used as examples of government-granted monopolies.
Example: Standard Oil (1870–1911)Under monopoly, monopoly firms can obtain excess profits through differential prices. According to the degree of price difference, price discrimination can be divided into three levels. [11] Natural monopoly, a monopoly in which economies of scale cause efficiency to increase continuously with the size of the ...
The term monopoly privilege rent-seeking is an often-used label for this particular type of rent-seeking. Often-cited examples include a lobby that seeks economic regulations such as tariff protection, quotas, subsidies, [21] or extension of copyright law. [22]
For example, in most countries, regulation controls the sale and consumption of alcohol and prescription drugs, as well as the food business, provision of personal or residential care, public transport, construction, film and TV, etc. Monopolies, especially those that are difficult to abolish (natural monopoly), are often regulated.