Monopoly

• Monopoly is a market structure where there is only one dominant firm.
• The monopolist is a price maker, deciding on their own price for the entire market.
• High barriers to entry and exit make it difficult for new firms to compete with the monopolist.
• The monopolist produces a unique product with no rivals in the market.
• Firms with over 25% market control have some degree of monopoly power.
• In a monopoly, the profit-maximizing output is where marginal cost equals marginal revenue.
• Monopolies are likely to be productively and allocatively inefficient.
• Monopolists can achieve dynamic efficiency through investment and innovation.

Monopoly is a market structure where there is only one dominant firm that controls the entire market. The monopolist acts as a price maker, setting their own price for both their firm and the market as a whole. Barriers to entry and exit are high, making it difficult for new firms to compete. Monopolists often produce unique products due to the absence of competition. While a pure monopoly is rare, firms with over 25% market control are considered to have some degree of monopoly power. In terms of efficiency, monopolies are unlikely to be productively or allocatively efficient. However, they have the potential for dynamic efficiency through investment in research and development. Monopolies can exploit consumers by charging higher prices and limiting choice, but they may also benefit from economies of scale, leading to lower prices. Natural monopolies, characterized by high fixed costs, may require government regulation to achieve higher levels of efficiency.