monopoly

characteristics

• firms are price makers

• 1 firm supplying all goods in the market

• goods are differentiated

• high barriers to entry/exit

• imperfect information

• profit maximiser

disads

• price is greater than marginal cost = monopoly is charging higher than cost - higher prices for consumers

• lower consumer surplus

• restricts output = low choice, risk of quality being low

• resources not following consumer demand, allocatively inefficient

• productively inefficient MC not equal to AC

• foregoing economies of scale

• x inefficient = producing beyong average cost curve

• lack competitive drive, dont need to reduce waste

• may have monopsony power = exploiting workers

• can gain political power to protect vested interest

• potential diseconomies of scale

ads

• dynamically efficient = can reinvest supernormal profits in new capital investment

• economies of scale = lower costs

• if they innovate consumers benefit from more choice = dynamically efficient

• reward of getting a patent can encourage innovation

• government regulation can force monopolies to be fair = fair to everyone

examples

• microsoft in 1980s a monopoly charging high prices for office

• farmers for supermarkets getting recieving low prices for their products (monopsony power)

• IT giants having political power = X, google, meta having control over media

monopoly deadweight welfare loss