Monopoly, general equilibrium, and wealth
The effects of monopoly in a single consumer goods industry are examined in the context of a three industry economy, in which one of the industries produces new capital goods. By means of a general equilibrium analysis employing neoclassical production functions, it is shown how monopoly in a single industry lowers the earning of labor and capital, usually by unequal proportions. The market price of the monopolized output increases; the prices of other outputs fall. The rate of return on new investment, however, may rise, fall, or remain unchanged. The rate of return effect is specifically determined by the factor intensity parameter of the production function for new capital goods. It is further shown that analysis of monopoly by partial equilibrium models, and the concept of a given industry cost curve in particular, is biased and ambiguous. Such models overestimate the loss of consumer welfare due to monopoly, and they underestimate its effects on resource earning and income distribution. 32 references, 1 figure, 2 tables.
- OSTI ID:
- 5529148
- Country of Publication:
- United States
- Language:
- English
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