Are monopolies legal or illegal?

Tucson Electric Power Company Southwest Gas Company Qwest All of these companies are monopolies--Natural Monopolies

The patent owner has the right to exclude others from making, selling, offering for sale, or importing into the U.S. the invention protected by the patent, unless they have the express permission of the patent holder to do so.

Patents last 20 years from the date of filing of the first patent application that includes the claimed invention. Patent lifespans used to be 17 years from the date of issuance, but that term was changed by the General Agreement on Tariffs and Trade (GATT) agreement in 1995.

Patent No. 1 on July 31, 1790, for an improvement "in the making Pot ash and Pearl ash by a new Apparatus and Process."

http://techweb.ceat.okstate.edu/ias/firstpatent.htm

It was essential for making soap and glass, dyeing fabrics, baking, and making saltpeter for gunpowder. Today its principal use is in fertilizers.

Traction wheels for a locomotive 1836http://www.nara.gov/publications/prologue/patent.gif

1836

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How Patents Work

The shoes, patented in 1994 by Israel Siegel, are powered by the walking motion of the user. Each time you take a step, your heel works to activate the air-conditioner compressor and expander.

http://www.calormen.com/TwistyPuzzles/PatentPics/US4409750.gif

Rubik Cube online

By 1982, sales rose to such unprecedented levels that in the West, according to some calculations, one in every three households possessed at least one RUBIK's Cube. The Cube's international fame and the export achievement became one of the contributing factors in the reform and liberalization of the Hungarian economy between 1981 and 1985 which finally led to the move from Communism to Capitalism. http://www.rubiks.com/g/products/online.gif

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http://www.studyabroad.com/content/portals/maps/hungary_map.gif

Good for the life of the author plus 50 years

http://cgi1.usatoday.com/life/_photos/2001-09-07-inside-michael-jackson.jpg

http://www.analitica.com/bitblioteca/img/beatles.jpg

http://nt.student.co.uk/music/images/michael-jackson.jpg

http://www.mjsite.com/young/babyface.jpg

http://www.cnn.com/2000/WORLD/europe/08/15/britain.beatles/beatles.mccartney.jpg

Jackson bought the publishing rights to 250 of the classic Beatles’songs in 1985.

He shocked the music world by outbidding Sir Paul McCartney and paying a reported $47 million for them

A trademark includes any word, name, symbol, or device, or any combination, used, or intended to be used, in commerce to identify and distinguish the goods of one manufacturer or seller from goods manufactured or sold by others, and to indicate the source of the goods. In short, a trademark is a brand name.

1. A single seller in the market.

2. The seller is a price searcher.

3. There are barriers to entry.

4. The seller is like any other seller in the market. He, she, or it will try to maximize profits.

5. The single seller can operate inefficiently because there is no competition.

Q 7 8 9 10 0 1 2 3 4 5 6 P 25 24 23 22 21 20 19 18 17 15 13 The only way a monopoly is able to sell more units of Q is by lowering its price.

Q 7 8 9 10 0 1 2 3 4 5 6 P 25 24 23 22 21 20 19 18 17 15 13 25 24 23 22 21 20 19 18 17 16 15 You had to have known there was going to be a graph.

D = P 0 1 2 3 4 5 6 7 8 9 10

Q x P = TR 7 8 9 10 0 1 2 3 4 5 6 25 24 23 22 21 20 19 18 17 15 13 0 24 46 66 84 100 114 126 136 135 130 25 24 23 22 21 20 19 18 17 16 15 What do you get when you multiply P x Q?

D = P 0 1 2 3 4 5 6 7 8 9 10

Q 7 8 9 10 0 1 2 3 4 5 6 P 25 24 23 22 21 20 19 18 17 15 13 TR MR 25 24 0 24 > > 46 > 66 84 24 22 20 > 18 > 16 100 > 14 114 126 > 12 > 10 136 135 130 > > -1 -5 23 22 21 20 19 18 17 16 15 In economics, we are not as concerned about total as we are about Marginal What is the formula for marginal revenue?

The change in TR / the change in Q D = P 0 1 2 3 4 5 6 7 8 9 10

Q 7 8 9 10 0 1 2 3 4 5 6 P 25 24 23 22 21 20 19 18 17 15 13 TR MR 25 24 0 24 > > 46 > 66 84 24 22 20 > 18 > 16 100 > 14 114 126 > 12 > 10 136 135 130 > > -1 -5 23 22 21 20 19 18 17 16 15 Graph MR MR D = P 0 1 2 3 4 5 6 7 8 9 10

7 8 9 10 0 1 2 3 4 5 6 Q TC 40 50 58 65 75 87 100 115 135 160 190 25 24 23 22 21 20 19 18 17 16 15 You’re probably wondering why I put a TC column if total isn’t all that important.

We “need” these numbers to figure out MC and ATC.

MR D = P 0 1 2 3 4 5 6 7 8 9 10

7 8 9 10 0 1 2 3 4 5 6 Q TC MC 40 50 > > 58 65 > > 75 > 87 > 100 115 > 135 > > 160 > 190 10 8 7 10 12 13 15 20 25 30 25 24 23 22 21 20 19 18 17 16 15 What is the formula for marginal cost?

The change in total costs / the change in Q D = P MR 0 1 2 3 4 5 6 7 8 9 10

7 8 9 10 0 1 2 3 4 5 6 Q TC MC 40 50 > > 58 65 > > 75 > 87 > 100 115 > 135 > > 160 > 190 10 8 7 10 12 13 15 20 25 30 25 24 23 22 21 20 19 18 17 16 15 Graph MC MC D = P MR 0 1 2 3 4 5 6 7 8 9 10

MC > 10 > 8 > > 7 10 > 12 > 13 > 15 > > 20 25 > 30 25 24 23 22 21 20 19 18 17 16 15 Graph MC MC D = P MR 0 1 2 3 4 5 6 7 8 9 10

7 8 9 10 0 1 2 3 4 5 6 Q TC MC 40 50 > > 58 65 > > 75 > 87 > 100 115 > 135 > > 160 > 190 10 8 7 10 12 13 15 20 25 30 25 24 23 22 21 20 19 18 17 16 15 Can we figure out the ATC if we have the TC?

MC What is the formula for ATC?

TC / Q D = P MR 0 1 2 3 4 5 6 7 8 9 10

Q TC ATC 7 8 9 10 0 1 2 3 4 5 6 40 50 58 65 50 28 22 75 87 100 115 135 160 190 19 17 17 17 17 18 19 ATC = TC / Q 25 24 23 22 21 20 19 18 17 16 15 Graph ATC starting at the 4th unit to the 9th unit.

MR MC ATC D = P 0 1 2 3 4 5 6 7 8 9 10

This monopoly seller produces 6 units (MR = MC) and sells each and every unit for $19.

25 24 23 22 21 20 19 18 17 16 15 MC ATC D = P MR 0 1 2 3 4 5 6 7 8 9 10

Is this monopoly earning an economic profit, and economic loss, or just breaking even?

Since the price is above the ATC at the profit maximizing Q of 6 units, the firm is earning an economic profit.

25 24 23 22 21 20 19 18 17 16 15 MR MC ATC D = P 0 1 2 3 4 5 6 7 8 9 10

Economic Profit is equal to the area, A, 19, B, C.

25 24 23 22 21 20 MC B ATC 18 C 16 15 D = P MR 0 1 2 3 4 5 6 7 8 9 10

25 Since this firm is earning an economic profit, will there be entry into the market place?

24 23 22 21 20 NO! Since this is a monopoly 18 there will be 16 no entry even though it is earning 15 economic profits.

B C MC ATC D = P MR 0 1 2 3 4 5 6 7 8 9 10

>When the preacher's car broke down on a country road, >he walked to a nearby roadhouse to use the phone. After calling for a tow >truck, he spotted his old friend, Harry, drunk and shabbily dressed at the >bar. "What happened to you, Harry?" asked the good reverend. "You used to >be rich." Harry told a sad tale of bad investments that had led to his >downfall. "Go home," the preacher said. "Open your Bible at random, >stick your finger on the page, and there will be God's answer." Some time >later, the preacher bumped into Harry, who was wearing a Gucci suit, >sporting a Rolex watch, and had just stepped out of a Mercedes. "Harry," >said the preacher, "I am glad to see things have really turned around for >you." "Yes, preacher, and I owe it all to you," said Harry. "I opened my >Bible, put my finger down on the page and there was the answer ...