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* of 25 Copyright ? 2010 Pearson Education, Inc. Publishing as Prentice Hall. Microeconomics: Principles, Applications, and Tools O’Sullivan, Sheffrin, Perez 6/e. C H A P T E R 10 Monopoly and PriceDiscrimination * of 25 Copyright ? 2010 Pearson Education, Inc. Publishing as Prentice Hall. Microeconomics: Principles, Applications, and Tools O’Sullivan, Sheffrin, Perez 6/e. Monopoly and PriceDiscrimination FERNANDO QUIJANO, YVONN QUIJANO, AND XIAO XUAN XU P R E P A R E D B Y A developer interested in building a casino in Creswell, Oregon, placed a curious announcement in the local newspaper. If local voters approved the casino, the developer promised to give citizens a total of $2 million per year. Microeconomics: Principles, Applications, and Tools O’Sullivan, Sheffrin, Perez 6/e. A P P L Y I N G T H E C O N C E P T S 1 2 What happens when a monopoly ends? Ending the Monopoly on Internet Registration What is the value of a monopoly? Bribing the Makers of Generic Drugs When do firms have an opportunity to charge different prices to different consumers? Paying for a Cold Soft Drink on a Hot Day Does voluntary pricing work? Radiohead Lets Consumers Pick the Price 3 4 Monopoly and Price Discrimination ● monopolyA market in which a single firm sells a product that does not have any close substitutes. ● market powerThe ability of a firm to affect the price of its product. ● barrier to entrySomething that prevents firms from entering a profitable market. Monopoly and Price Discrimination ● patentThe exclusive right to sell a new good for some period of time. ● network externalitiesThe value of a product to a consumer increases with the number of other consumers who use it. ● natural monopolyA market in which the economies of scale in production are so large that only a single large firm can earn a profit. THE MONOPOLIST’S OUTPUT DECISION 10.1 Total Revenue and Marginal Revenue ? FIGURE 10.1The Demand Curve and the Ma