Monopoly

A monopoly is a market structure in which there exists only a single seller of the product who is the
sole producer of the product, which has no close substitutes. So, the features can be:-
  1. Single seller of products
  2. Absence of close substitutes
  3. No freedom to entry and exit
  4. Firms are price makers
  5. Possibility of price discrimination
Under this form, the demand curve is not a straight line but a downward sloping curve with the corresponding MR curve.
monopoly curve

The graph shows that the demand and the MR curves are downward sloping curves and B point is the point of equilibrium where MC might cut MR.

  • Short-run equilibrium under monopoly- Under monopoly, the equilibrium point is determined where MC = MR. The firms also have three situations of profits, losses, and zero economic profits in the short run.
  • Under monopoly, price discrimination is possible and the sellers use the method to earn profits. Example: Organization of the petroleum exporting countries.
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