Chapter 17: Oligopoly

Chapter 16 introduces the idea of oligopolies. An oligopoly is market with only few sellers. An oligopoly lies in between a monopoly and a competitive market since there are few sellers. An oligopoly is similar to a competitive market since the products are identical, and is similar to a monopoly since the firms have more market power. A key concept dealing with oligopolies is the idea of a Nash Equilibrium. The oligopoly firms will pursue their self interests, arriving at the Nash Equilibrium.

Chapter 15

Chapter 15 is all about monopolies. A monopoly is completely different from a competitive market. In a competitive market, there are many buyers and sellers, but in a monopoly, there is only one seller. Also, a monopoly is a price maker. As a price maker, the monopoly is the only seller, so they are able to set the price in the market with no competition.

However, being the only seller means a monopoly is subject to regulation. If there was no regulation, the monopoly could charge outrageous prices and make a ton of profit. In order to prevent this from happening, monopolies are regulated by the government.

Chapter 14

Chapter 14 deals primarily with a perfectly competitive market. So far in microeconomics, we have assumed that all markets are perfectly competitive. For the sake of the supply and demand models we have been dealing with, the markets have been perfectly competitive. Chapter 14 describes how a perfectly competitive market has many buyers and sellers, equivalent products, and no barriers to entry or exit. As we learned of all firms last chapter, a perfectly competitive firm's goal is to maximize profit.

What we learn in this chapter is how a firm reaches maximum profit. A firm maximizes profit when its marginal cost of producing a good is equal to its marginal revenue. When this happens, profit is maximized because an additional output will not increase the marginal benefit. The firm's price is set at the point where marginal revenue is equal to marginal cost.