Monopoly: This is a situation where a single producer (firm) is the sole producer of a good that has no close substitutes.

Sources of Monopoly:  The firm may control the entire supply of raw materials required to produce that output.  The firm may have a patent or copyright.  The case of “Natural Monopoly”. Economies of Scale may permit only one firm to be efficient in the market.  The case of Government Franchises.

Characteristics of Monopoly:  A single seller: A single firm produces all industry output. The monopoly is the industry.  Blockaded entry and exit: Firms are heavily restricted from entering or leaving the industry.  Imperfect dissemination of information: Cost, price, and product quality information are withheld from uninformed buyers.

AVC ATC MC MR D P Q0 b c a Quantity Price

ATC AVC MC MR D Q0 a Quantity Price P c b

ATC AVC MC MRD 0 a Q P Quantity Price c b n m

MC MR D P Q0 a b c Quantity Price LAC LMC Q*Q* s r t u

LMC=LAC PCPC QCQC D MR Quantity Price 0 m n QMQM a b PMPM Monopolist’s Profit Deadweight Loss under Monopoly

Rate of Return on Stockholders’ Equity: Stockholders’ Equity = The book value of total assets minus total liabilities.

Monopolistic Competition: It is a form of market organization in which there are many sellers of a heterogeneous or differentiated product, and entry into and exit from the industry are rather easy in the long run. Differentiated Product: Products which are similar but not identical and satisfy the same basic need.

Characteristics:  Large number of buyers and sellers.  Product Heterogeneity.  Free Entry and Exit.  Perfect dissemination of information.

MC MR D P q0 a b c Quantity Price LAC LMC s r q1q1 D1D1 MR 1

MC P q0 a Quantity Price LAC LMC D1D1 MR 1

MC MR D P q0 a b c Quantity Price LMC q1q1 D1D1 LAC d e