Monopoly Essay

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MONOPOLY
What is monopoly?
Monopoly is derived from two Greek words monos (alone or single) + polein   (to sell)).Monopoly is a term used by economists to refer to the situation in which there is a single seller of a product (i.e., a good or service) for which there are no close substitutes .monopolies   are thus characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods
Characteristics
• When we discuss a monopoly, or oligopoly, etc. we're discussing the market for a particular type of product, such as toasters or DVD players. In the textbook case of a monopoly, there is only one firm producing the good. In a real world monopoly, such as the operating system monopoly, there is one firm that provides the overwhelming majority of sales (Microsoft), and a handful of small companies that have little or no impact on the dominant firm.
• Because there is only one firm (or essentially only one firm) in a monopoly, the monopoly's firm demand curve is identical to the market demand curve, and the monopoly firm need not consider what it's competitors are pricing at. Thus a monopolist will keep selling units so long as the extra amount he receives by selling an extra unit (the marginal revenue) is greater than the additional costs he faces in producing and selling an additional unit (the marginal cost). Thus the monopoly firm will always set their quantity at the level where marginal cost is equal to marginal revenue.
• Because of this lack of competition, monopoly firms will make an economic profit. This would normally cause other firms to enter the market. For this market to remain a monopolistic one, there must be some barrier to entry. A few common ones are:
• Legal Barriers to Entry - This is a situation where a law prevents other firms from entering the market to sell a product. In the United States, only the USPS can deliver first class mail, so this would be a legal barrier to entry. In...

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