ECON 1201 Lecture 21: Micro Economics Chapter 13: Part 1
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In order to develop model and make predictions about producers will behave, we have developed four principle models of market structure: Monopolist: a firm that is the only producer of a good with no close substitutes. An industry controlled by a monopolist is know as a monopoly. Market power: the ability of a firm to raise prices. The demand curve in a monopoly is the market demand curve because the monopoly is the market! Can divide markets, to charge different prices for the same good, into parts to maximize profit. A monopolist reduces the quantity supplied and moves up the quantity demand on the demand curve up to raise the price. Profit will not persist in the long run unless there is a barrier to entry, which keeps additional firms out of the market. Barriers to entry are essential for monopolies. They generate profit for monopolist in the short run and long run.
