KRUGMAN'S

1
Monopoly and Public Policy

• KRUGMAN'S
• MICROECONOMICS for AP

Margaret Ray and David Anderson
2
What you will learnin this Module

• The effects of monopoly on societys welfare.
• How policy-makers address the problems posed by
  monopoly.

3
What you will learnin this Module

• The purpose of this module is to show that, when
  compared to perfect competition, the existence of
  monopoly reduces output and raises prices to
  consumers, while earning economic profit for the
  firm. By producing at an output below that where
  PMC, monopoly causes a loss of total welfare
  deadweight loss. In order to mitigate the
  negative consequences for consumers, government
  can adopt policies to regulate a monopoly firm.

4
The Welfare Effects of a Monopoly
5
Preventing Monopoly Power

• Antitrust Laws address monopolization in
  markets
• (Antitrust laws are discussed in more detail
  in the modules dealing with oligopoly)

Brian Smith/Zuma Press
6
Dealing With A Natural Monopoly

• Public ownership
• Price regulation

7
Price Regulation