Topic 15: What is a Monopoly

The three main characteristics that make a firm a monopoly are only one seller, producing a unique product, and having barrier to entry. A monopoly sets the price in the market by itself because the firm is the only producer of a certain product, it can manipulate the quantity produced to a profit maximizing quantity. They reach this by producing at the point where marginal cost is the same as the marginal revenue. At this point, monopoly produces at the profit maximizing quantity. However, they can go over this point unlike perfect competition, monopolies can increase the price because they are the only producer of a certain product, the more inelastic the prices would be, the more price they can raise. The cost of the monopolist is the cost for the firm to product the products and the benefits is the profits they earn by selling the product they makes. The consumer will get less benefit because monopoly will have a price that is above normal average price which will cost them to pay more money for the products. One commentator mentions that a problem with monopoly is that monopoly will take extra money from the consumer, but economists are not concerned about this. Economists are concerned about the inefficiency. Economists encourage an efficiency monopoly. I agree because an inefficiency monopoly will harm both producer and consumer which are not good for everyone. Monopoly can be good if average cost is decreasing output, then large scale manufacture in production. I don’t think is worth it to attain a monopoly because there is dead weight lose and it’s also inefficient.

Topic 14: Productivity Experiment

In this experiment we are observing the relationship between the numbers of workers and the efficiency of the work. My job in that experiment is the worker who is hire by the boss of the firm to work for the product. I join the firm at the middle of the time which is about eight workers at that time working in the firm. At the beginning the marginal benefits keeps going up after each unit of worker is add in the firm. However, when the workers keep adding in firm, the marginal benefits keep decreasing and become negative at the end. At the end when twenty workers are working in one firm produce about the same products compare to five workers. Which is very inefficient because the boss will need to pay extra money for those workers who are doing nothing are can’t do anything to help because of the lack of capital. This is what I expected will happen because the products will not keep going up when the workers are increase. In the short terms, the company can make the productivity to the highest by keeping the workers at the numbers that produce the maximum marginal benefits. In the long terms, If the marginal benefits keep decreasing, the firm shall just shut down or add more capital in order to keep the company running and learn money.