# Ch 7: Firm Behavior & Monopoly in Microeconomics

Explore these lessons to understand the microeconomics topic of a monopoly and how it can affect firm behavior. Read through the lesson materials to identify other key concepts, such as a perfect market, monopolistic competition, and oligopolies.

## Firm Behavior & Monopoly in Microeconomics - Chapter Summary and Learning Objectives

Lawmakers both support and oppose monopolies, which may seem confusing as you learn about microeconomics. These lessons will help clarify the issue and explain instances when monopolies are beneficial as well as when monopolies can be harmful to both producers and consumers. Each lesson explores a single topic related to monopolies in microeconomics, and these lessons often include related formulas and real-world examples. Additional topics discussed are as follows:

• Formulas to calculate different types of profit
• The characteristics of perfect competition
• Effects of price discrimination
• Monopoly vs. natural monopoly
• Monopolistic competition
• Oligopoly
• The application of game theory in economics
• Nash equilibrium

Lesson Objective
How to Calculate Economic Profit: Definition & Formula Describe the concept of economic profit and go through the related formula.
Accounting Profit: Definition & Formula Identify and practice the equation that allows you to determine the accounting profit.
Profit Maximization: Definition, Equation & Theory Delve into the theory of profit maximization and learn the associated equation.
Normal Profit, Supernormal Profit & Loss Situations Provide definitions for each of these terms, then discuss how those definitions can change given the following circumstances: oligopolies, competitive markets, monopolistic markets, and monopolies.
Perfect Competition in Economics & Adam Smith's 'Invisible Hand' Establish which conditions need to be in place to create perfect competition, analyze the effects of perfect competition on firms and consumers, and review Smith's concept of the 'invisible hand.'
Price Discrimination: Definition, Types & Examples Explore price discrimination and point out the different types.
What is a Monopoly in Economics? - Definition & Impact on Consumers Outline the conditions necessary for a monopoly, describe reasons that explain why policymakers both allow and discourage monopolies, and show the influence monopolies have on producers and consumers.
Natural Monopoly in Economics: Definition & Examples Investigate the existence of natural monopolies and offer examples of service providers who possess natural monopolies.
Understanding Monopolistic Competition in Economics Elaborate on the concept of monopolistic competition, identify and compare industries that are in monopolistic competition, and discuss how this competition affects the economy.
Characteristics of Monopolistic Competition Breakdown monopolistic competition even further into the following three components: product differentiation displayed via advertising; profit maximization; and inefficiency, excess capacity, and both long-run and short run equilibrium.
What is an Oligopoly? - Definition & Impact on Consumers Scrutinize the advantages and disadvantages of an oligopoly, determine the characteristics of an oligopoly, show the effect it has on producers and consumers, then analyze the communication tactics of producers within oligopolies.
What is Game Theory? - Explanation & Application in Economics Describe the tenets of game theory, go over the prisoner's dilemma, then show the connection between game theory and the prisoner's dilemma as compared to the connection between the main economic systems and economics.
Nash Equilibrium & Game Theory Identify the characteristics of Nash equilibrium, detail how this impacts supply and demand, then differentiate between Nash and market equilibrium.

17 Lessons in Chapter 7: Firm Behavior & Monopoly in Microeconomics
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Chapter Practice Exam
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Practice Final Exam
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