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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 21: Factor Demand | Unit 1: Factor Markets
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Page: 6 of 24
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In this unit, you should have learned about:- The composition of wages paid for labor, including monetary payment and psychological rewards.
- How factor markets deal with all four resource categories -- labor, capital, land, and entrepreneurship.
- How factor markets exchange the services of resources and not the actual resources.
- A review of the four resource categories -- labor, capital, land, and entrepreneurship.
- The four payments that correspond to the four resource categories -- wage, interest, rent, and profit.
- The role factor (or resource) markets play in the circular flow model of the economy.
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MONOPOLISTIC COMPETITION, LONG-RUN ADJUSTMENT A monopolistically competitive industry undertakes a two-part adjustment to equilibrium in the long run. One is the adjustment of each monopolistically competitive firm to the appropriate factory size that maximizes long-run profit. The other is the entry of firms into the industry or exit of firms out of the industry, to eliminate economic profit or economic loss. The end result of this long-run adjustment is two equilibrium conditions--one for profit maximization, the other for zero economic profit.
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BLUE PLACIDOLA
[What's This?]
Today, you are likely to spend a great deal of time lost in your local discount super center wanting to buy either a 50 foot extension cord or a combination CD player, clock radio, and telephone (with answering machine). Be on the lookout for cardboard boxes.
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The average length of a "business lunch" is about 36 minutes.
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"The greatest things ever done on Earth have been done little by little. " -- William Jennings Bryan
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MCP
Marginal Cost Pricing
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