While a monopoly may exist in a given market, a monopolist is IPRs like a drugīecome a monopolist because government awards an exclusive marketįranchise, e.g. Is Microsoft a “natural monopoly’? Third, a firm may acquire control over product through a patent onĪ basic process of production or the product itself, e.g. Producing the product reaches a minimum at an output sufficient to supply Second, a firm may become a monopolist because the average cost of First, one firm may control the entire supply of a basic input. Monopoly exist for one or more of four reasons. Power exercised by a single buyer facing many producers. The inverse of a monopoly or monopsony can also exist, i.e. Supplied is less and the price higher than under perfect competition. In theory the monopolist is considered inefficient because the quantity Producer tends equates marginal revenue and marginal cost rather than The firm is able to choose the price-quantity combination to maximize its Pricing decision has a negligible effect on competitors because there are Unfettered by competition the monopolist knows the impact of any The only seller is the same as the market demand curve. There is a negatively sloped demand curve. No distinction between the firm and the industry, i.e. Monopoly satisfies the following conditions:
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