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

2. 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.

3. 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.

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

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

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

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

10. 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.

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

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