equilibrium F is at MC = MR and the market produces a smaller quantity 0Qm and a higher price.

MRPTxy > Px/Py

• indicating that the 1st and the 3rd (top level condition) for pareto optimum is violated.
  

• PmGEPc the loss in consumer surplus part of which is a srate transfer from consumers to monopoly
• GEF being the deadweight loss
• HeQcQmis to be transferred to the other sectors of the economy, there is often lags.

• allocative inefficiency arising from a monopoly on one of to sectors. produce to little of one good is produces
• X inefficiency monopolists do little to utilize their existing resources efficiently.

natural monopoly

• cost high to get into the market,
• the minimum average cost of production is at a level of out put sufficient enough to supply the whole market, only one firm can operate efficiently

increasing returns to scale

• the long term AC diminishes.
• MC curve will lie below the AC curve
• PG 70
• the profit maximizing position of a monopoly leads to to little being produced and to higher price, leading to welfare loss

what should be done.

• to rectify the monopoly must be bought by the gov and run at a loss
• and cover the resultant loss with a unit subsidy ES
• government owned monopolies are also less X efficient than private monopolies and have less incentive to innovate and implement cost saving innovations
• privatization this usually goods hand in hand with regulation. regulated privatization
  
  • may result in job losses, money get the already rich

• monopolistic completion when many firms produce close substitutes and each firm has some control over price.
• oligopoly only a few firms produce a homogeneous product and has considerable control over the price.

• structure-conduct-performance (SCP) hypothesis the structure of the industry determines its conduct and performance.
  
  • competition policy

South African markets are dominated by a few