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MONOPOLY
Member rating: No Rating | Words: | Submitted: Fri Mar 31 2006
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MONOPOLY Monopoly is a market structure where there is only one supplier of a good or service for which there are no close substitutes. CHARACTERISTICS: * The firm and the industry are the same. Hence, the industry demand curve is downward sloping. To sell more output the monopolist has to reduce price. * The firm is a price maker. By setting the price, the monopolist sells the quantity consumers are willing to purchase, or if the monopolist decides on output, price is determined bu the demand curve. The monopolist cannot decide both the quantity and price he wishes to sell. * The profit maximising equilibrium of the monopolist allows super normal profits to be earned both in the long and short run: AR> AC * Barrier to entry: * Legal monopoly: the nationalised industries where the state has the sole legal right to supply a service e.g the Post Office on the delivary of...
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