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NATURAL MONOPOLY: A special type of monopoly that's able to lower its price when it produces and sells a larger quantity. This somewhat remarkable ability results because a natural monopoly uses a great deal of capital. In that capital carries an up front cost that must be paid regardless of production, a natural monopoly can spread these costs over larger quantity--if it produces more. The larger the quantity sold, the lower the cost for each unit. A single natural monopoly is thus able to produce and supply a good at a lower cost, and price, than two or more firms. In other words, if two or more firms try to supply the same good, the market will "naturally" end up with just one.

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Lesson 15: Aggregate Market | Unit 3: Doing Curves Page: 14 of 22

Topic: Short-Run Equilibrium <=PAGE BACK | PAGE NEXT=>

Let's identify short-run equilibrium.
  • The negatively-sloped aggregate demand curve, is labeled AD. This curve is the same as in the long run.
  • The SRAS curve is the positively-sloped short-run aggregate supply curve.
  • The short-run aggregate market equilibrium at the intersection of the two curves.
At this short-run equilibrium:
  • The quantities of real production demanded and supplied are equal, buyers and sellers are satisfied, and the price level doesn't change.
  • But, we don't know where full employment is located. This equilibrium might involve a surplus or a shortage in the labor market.

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KEYNESIAN DISEQUILIBRIUM

The state of the Keynesian model in which aggregate expenditures are not equal to aggregate production, which results in an imbalance that induces a change in aggregate production. In other words, the opposing forces of aggregate expenditures (the buyers) and aggregate production (the sellers) are out of balance. At the existing level of aggregate production, either the four macroeconomic sectors (household, business, government, and foreign) are unable to purchase all of the production that they seek or producers are unable to sell all of the production that they have.

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Today, you are likely to spend a great deal of time at a garage sale looking to buy either a set of steel-belted radial snow tires or a wall poster commemorating the 2000 Presidential election. Be on the lookout for door-to-door salesmen.
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The first U.S. fire insurance company was established by Benjamin Franklin in 1752 in Philadelphia.
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