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

2. 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.

3. 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

4. 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

5. 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

6. CHARACTERISTICS OF MONOPOLY