Monopoly Market
Monopoly Market

Monopoly Market

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A Monopoly Market is a structure in which the entire market is served by a single company that strives for maximum profit and the absence of competitors. A monopoly is created as a result of one or any combination of four factors: control over the main input factors of production; economies of scale, or economies of scale resulting from increased production; patents, and government licenses. But the most important of them is the effect of scale.

Since the monopolist is the only seller in this market, the demand curve is a downward curve of market demand. In contrast to the firm of perfect competition, the monopolist must lower his prices if he wants to increase the output. The condition for maximizing profit for a monopolist is that he needs to increase output when the gain in revenue exceeds the increase in production costs. Otherwise, the monopolist must reduce output. When a monopolist decides what the level of output should be at each of his several enterprises, he distributes output among them so that the marginal costs are the same at each enterprise. When a monopolist is able to sell its products in several markets, it distributes the products among the markets so that the marginal returns are the same in each market. In contrast to perfect competition, monopolistic equilibrium often does not exhaust all the potential benefits of trade. The cost of an additional unit of production for the company exceeds the cost of the monopolist on the resources necessary for its production. The latter conclusion has often been used to prove that a monopoly is less effective than a competing firm. But this statement did not affect the situation in practice, because the conditions conducive to the emergence of a monopoly and the features of economies of scale are rarely comparable to the conditions necessary for the successful functioning of a competing company.

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17 days ago

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