SFD Short—Monopolies

It’s the last of all news shows, folks, and it’s barely newsy at all. We’re talking about monopolies in the American economy, which was, incidentally, the subject of Robert Reich’s last book, Saving Capitalism.

The show explains itself, and as it promises, here’s some graphs for you:

This is an Econ 101 graph of perfect competition. S is supply, D is demand, MC is marginal cost, and P is price. Then we’ve got something more complicated, monopoly:

MR is marginal revenue, MC is marginal cost again, ATC is average total cost. Without getting into the technical stuff, which you can find right here, a monopoly produces quantity where marginal costs are equal to marginal revenue for units produced, that’s line Q1, but they charge price P, much higher than what would be determined in perfect competition, and they take home the difference as profit.

Likewise, since for monopolies, the marginal cost curve acts as the supply curve, everything in that triangle that says deadweight loss is product that the firm would have produced in perfect competition but now does not.

I’m not even going to try to type this one out, but here’s a video.

One thought on “SFD Short—Monopolies”

  1. Jon Coumes’ podcast on Monopolies and Oligopolies is a brilliant and insightful (and scary) lesson on what makes America tick from an economic standpoint. His discourse on the illusion that many of us have grown up believing; namely, that the free market favors competition over monopoly … is staggering in its implications. Thank you, Mr. Coumes!

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