Money, Monopoly & Market Intervention

Robert P. MurphyMises Academy

October 12, 2011

Lecture 2: 2nd half of Chapter 10 of Man, Economy, and State

2nd Half ofChapter 10 of MES

1. Illusion of Monopoly Price A. Definition of Monopoly..

2. Unions and Restrictionist Wages

III. Monopolistic Competition

IV. Patents vs. Copyrights

I. Illusion ofMonopoly Price

A. Definitions of Monopoly/Monopolist

“Can control its price.”

“The only seller of a given good.”

“A grant of special privilege by the State, reserving a certain area of

production to a group or individual.”

“Person who has received a monopoly price.”

B. Is a Trademark aGov’t Monopoly?

C. Review: Neoclassical Monopoly Theory

Rothbard, following Mises, stresses that monopoly price can only occur if original “competitive” price occurred on inelastic portion of demand curve.

But current neoclassicals would disagree. Even if Total Revenue goes down by restricting output, it makes sense to do so (on the margin) because Total Costs fall too. Thus Profit goes up, even if monopolist reduces output from a point originally on the elastic portion of the demand curve.

D. Monopoly Profit vs. Monopoly Gain

E. Cutthroat Competition

F. No Such Thing as “Competitive” Price!

G. Why not P=MC?

II. Unions and “Restrictionist” Price

� Voluntary Unions?

III. Monopolistic Competition

A. Flipping the Argument…

B. Jagged Cost Curve

IV. Patent vs. Copyright