THE NATURE OF MONOPOLY Microeconomics Made Easy by William Yacovissi Mansfield University © William Yacovissi All Rights Reserved.

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THE NATURE OF MONOPOLY Microeconomics Made Easy by William Yacovissi Mansfield University © William Yacovissi All Rights Reserved

CHARACTERISTICS OF MONOPOLY l The characteristics of monopoly markets are described on pages 207, 208, and 209 l The key point is that in the absence of competition the monopolist can charge any price. But the monopolist can’t escape the market demand for the product.

CHARACTERISTICS OF MONOPOLY l That is, the monopoly company can set the price but market demand determines sales at that price level. l Conversely a monopoly can set a desired level of sales, but then has to adjust price to whatever it takes to achieve that level of sales

CHARACTERISTICS OF MONOPOLY l So the monopolist really gets to pick a price and quantity combination from the market demand curve. l But which price and quantity combination will maximize profits

CHARACTERISTICS OF MONOPOLY l As illustrated on page 216 and the following slide, the monopolist should charge a price equates the marginal revenue of the product with the marginal cost of the product l This occurs at point G on the diagram. The written assignment with this lesson merely asks you to find the same price using a table instead of a graph

CHARACTERISTICS OF MONOPOLY

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