Monopoly - Price and Output for a Monopolist
- Levels: A Level
- Exam boards: AQA, Edexcel, OCR, IB, Other, Pre-U
A pure monopolist in an industry is a single seller. It is rare for a firm to have a pure monopoly – except when the industry is state-owned and has a legally protected monopoly
- The Royal Mail used to have a statutory monopoly on delivering household mail. This is changing fast as the industry seen fresh competition. The Royal Mail was part-privatised in 2013.
- A working monopoly: A working monopoly is any firm with greater than 25% of the industries' total sales. In practice, there are many markets where businesses enjoy a degree of monopoly power even if they do not have a 25% market share.
- A dominant firm is a firm that has at least forty per cent of their given market
Price and output under a pure monopoly
- A monopolist can take market demand as its own demand curve
- The firm is a price maker but it cannot charge a price that the consumers will not bear
- A monopolist has market power which is the power to raise price above marginal cost without fear of losing supernormal profits to new entrants to a market
- In this sense, price elasticity of demand acts as a constraint on the pricing-power of the monopolist
- Assuming that the monopolist aims to maximise profits (where MR=MC), we establish a short run price and output equilibrium as shown in the diagram below
You Might Also Like
6th November 2016
9th October 2016
2nd October 2016
26th August 2016
17th May 2016
More From the Digital Store
A comprehensive collection of editable lesson topic worksheets to support the teaching of the core teaching content Year 1 (AS) A Level Economics specification.
Topic-by-topic editable PowerPoints for teaching all aspects of the specification content for Year 1 in OCR A Level Economics.
A comprehensive series of topic-by-topic study notes to support students on Section 1 (Microeconomics) of the IB Diploma in Economics. It covers both the SL and HL content of the IB...
Much cheaper & more effective than TES or the Guardian. Reach the audience you really want to apply for your teaching vacancy by posting directly to our website and related social media audiences.