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Monopoly
Monopoly:Monopoly: Why?Why?
Natural monopoly (increasing returns
to scale),), e.gg. (p(parts of)) utilityy
companies?
ArtificialArtificial monopolymonopoly
–a patent; e.g. a new drug
–sole ownership of a resource; e.g.
a toll bridge
–formation of a cartel; e.g. OPEC
Monopoly:Monopoly: AssumptionsAssumptions
Many buyers
OnlyOnly oneone sellerseller ii.ee. notnot aa ppricerice-takertaker
(Homogeneous product)
Perfect information
RestrictedRestricted entryentry (and(and possiblypossibly exit)exit)
Monopoly:Monopoly: FeaturesFeatures
The monoppolist’s demand curve is
the (downward sloping) market
demanddemand curvecurve
The monopolist can alter the market
price by adjusting its output level.
