Chapter 15 Review

I thought this chapter was relatively easy compared to the previous chapter. This chapter is basically a continuation of the concepts of the previous chapter and that reinforced my knowledge in terms of marginal revenue, marginal costs, and average costs and how they affect the market.

Unlike the previous chapter where it talks about competitive markets, this chapter is about the concept of monopolies. In a monopoly, the firm is a price maker, not a price taker (perfectly competitive market) . A monopoly arises when a firm is able to produce a good that is differentiable from other goods or can produce a good at a lower cost. Monopolies produce at the quantity where marginal revenue equalscost and price is where the quantity rises to the demand curve.

Something interesting I found in the book was another type of monopoly, which is a government created monopoly. This monopoly arises when government restricts entry by giving a single firm the exclusive right to sell a particular good in certain markets. This chapter was relatively the same in difficulty as the previous chapter. An example of this would be patent and copyright laws.

Further into this chapter, it also discusses the price and output effect. The output effect is, as more goods are sold, profit increases. For price effect, as price falls, profit is lower. The financial compromise given the marginal cost of producing an additional unit gives a tantamount influence in the ins and outs of marketing firms.