Tài liệu Monopoly docx

© 2003 McGraw-Hill Ryerson Limited.

Monopoly

Chapter 12

© 2003 McGraw-Hill Ryerson Limited.

12 - 2

Introduction

◆ Monopoly is a market structure in

which a single firm makes up the entire

supply side of the market.

◆ Monopoly is the polar opposite of

perfect competition.

© 2003 McGraw-Hill Ryerson Limited.

12 - 3

Introduction

◆ Monopolies exist because of barriers to

entry into a market that prevent entry by

new firms.

◆ Barriers to entry include legal barriers

such as a patent, and natural barriers

such as the size of the market that can

support only one firm.

© 2003 McGraw-Hill Ryerson Limited.

12 - 4

The Key Difference

Between a Monopolist

and a Perfect

◆Competitor A competitive firm is too small to affect

the price.

◆ It does not have to take into account the

effect of its output decision on the price it

receives.

© 2003 McGraw-Hill Ryerson Limited.

12 - 5

The Key Difference

Between a Monopolist

and a Perfect

◆Competitor A competitive firm's marginal revenue is

the market price.

◆ A monopolistic firm’s marginal revenue is not equal to

its price – it takes into account that in order to sell

more it has to decrease the price of its product.