Chapter 16

Chapter 16 talks about a different economic system from those in a perfectly competitive market or a monopoly. It focuses on monopolistic competitive markets such as an oligopoly. Some characteristics of a monopolisticly competitive market is that it has many firms and free entry. This chapter also talks about two ways in which conopolistically competitive markets are different from competitive markets. One reason is that in a monopolistic competitive market, there is an excess capacity. That means that it operates on the downward sloping part of the ATC curve. Another reason it is different is that each of the firms charges a price that is above the marginal cost of the item. Because the price is set above the marginal cost in a monopolistic competitive market, there are deadweight losses as a result. Another problem is that there can be too many or very few firms which are inefficiencies that are hard to correct by the government. The chapter also talks about how brand names are a problem because firms use them to manipulate consumers and to reduce the competition. Some believe that using brand names to compete gives firms incentives to improve the quality of their products and to lower their prices as much as possible. 

Article 5 Review

This article is achieving success, instead of pursuing economics. Scott Adams, who wrote Dilbert, wrote about how to achieve success by learning from your own mistakes. The difference between the advice Scott gives and the advice others give is to not be guided by your goals. His way of portraying people that are guided by the goals they set themselves, is in a way that shows they set themselves for failure. He talks about how a person is in that state of failure until they have achieved their goals. Of course, when those success is achieved, the satisfaction is immense.  Scott Adams argues that once a person achieves their goals in life, they either lose their motivation or create a new goal in order to enter the failing state before success is achieved again. Scott Adams has an interesting viewpoint against pursuing interests that one is interested or passionate about. The main idea in the article appears to be that once a persons business achieves success, then that person can become passionate about it. Otherwise, one doesn't need passion to start any business.  

Chapter 15: Monopolies

This chapter focuses on monopolies by comparing monopolies to firms in a competitive market. The chapter defines a monopoly as a firm that is the sole seller of a product without any close substitutions. One difference is that a firm in a competitive market is a price taker whereas a monopoly is a price maker. In general, the price charged by monopolies is higher than the marginal cost. But, there goal is the same to that of a firm in a competitive market, to maximize profit. The force of the invisible hand guides competitive market firms whereas monopolies work in their self interest so often, those interests aren't the interest of society. There are three important barriers that may be the cause as to why other firms don't enter the market for monopolies. One reason is that key resources are owned by one firm. The second reason given is that the government sometimes gives a single firm exclusive rights to a product, such as a drug. The third reason given is that the costs of production make a single producer more efficient than a large number of producers. A kind of monopoly that arises because a single firm can supply the good or service to an entire market at a smaller cost than could two or more, is called a natural monopoly. When looking and the demand curves of a competitive market firm and a monopoly, their demand curves are very different. For a competitive market, the demand curve is perfectly elastic whereas for a monopoly, the demand curve is sloping downwards.  When looking at the general graph of a monopoly, in general the price is greater than the marginal revenue and total cost. Therefore, the point of maximum profit is still where the marginal cost and marginal revenue intersect.