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Lecture B (WK6) - Lecture B(WK6 Welcome Back Chapter 13...

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Lecture B (WK6) Welcome Back! Chapter 13 – Pure Monopoly A pure monopoly exists when a single firm is the sole producer of a single product for which there are no close substitutes. There are a number of products where the producers have a substantial amount of monopoly power and are called “near” monopolies. Monopolies can exist because of significant barriers to entry . Some of these barriers can be economies of scale, legal barriers, control of essential resources, or other strategic barriers. With one firm in a monopoly market, there is no distinction between the firm and the industry. While the demand curve facing a perfectly competitive firm is perfectly elastic (figure 13.2, page 264), the firm demand under monopolies is the industry (market) demand and is downward sloping (fig 13.5, page 267). For a monopolist, an increase in output involves not just producing and selling it, but also reducing the price of its output to sell it. The monopolist is a price maker . The
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