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Monopoly is a market structure characterized by a single firm that controls the entire supply of a good or service. Key features include a lack of variety in goods, considerable barriers to entry, and complete control over pricing. Economies of scale often play a role in monopolies, bolstered by government actions such as patents, licenses, and exclusive franchises. Price discrimination enables firms to maximize profits by segmenting customers based on their willingness to pay, allowing targeted discounts like rebates or promotions for specific groups.
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Characteristics of monopoly • Single firm (producer, seller) • No variety of goods • Complete barriers to entry • Complete control over price
Government monopolies Patent- license that gives inventor exclusive right to sell product for 20 years
Government monopolies • Franchise- right to sell a good or service in an exclusive market
Government monopolies License- government issued right to operate a business
Government monopolies Industrial organizations- an industry government allows to operate with restricted number of firms that act together
Price discrimination Dividing customers into groups based on how much they will pay for a good Can be done if firm has market power (ability to change prices and output like a monopolist)
