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A monopolistic market.
Member rating: No Rating | Words: | Submitted: Mon Jun 19 2006
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In a monopolistic market, there is a sole supplier of the good in question. This allows the firm the power to be a price setter rather than a price taker, unlike the case of perfect competition. In fact, the monopolist has a choice of whether to set price or supply. As there is only one supplier of the good, the firm is faced with the market demand curve and is therefore not able to dictate both price and supply as for a given price level, only a certain quantity will be demanded. The monopolistic market works to the benefit of the monopolist rather than the consumers. The monopolist is a profit maximiser, and thus produces at the quantity where marginal revenue (MR) is equal to the marginal cost (MC). At this point, all possible profits are captured. Through the production of one more unit, MC would exceed MR and reduce total...
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