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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