Office of International & Study Abroad Programs
Study Abroad Handbook
Fordhams Office of International and Study Abroad Programs (ISAP) wishes you well
as you embark on what will undoubtedly be a culturally and academically enriching
journey. Please take
High Entry Barriers
Monopoly ﬁrms like being the only seller. so they try to prevent other firms from entering the industry. thus making it competitive. Also. sometimes the government tries
to prevent competition. This is coiled "barriers to entry."
The proﬁt for the monopolist is then found from the ATC to the Price theyr are charging. Anything in that shaded area is above their cost of production and therefore
Fair Return Price
ATC = Demand Socially Optimum Price
QM Gr Qua
To ﬁnd the price and quantity for a monoplist. ﬁrst ﬁnd MC at MR; where MC and MR intersect (that part is similar to perfect competititon). Draw a line down to the
horizontal axis and you have your quantity. Now. from that quantity, draw a line upward unt
Since a monopolist is a proﬁt-maximizer. it will lower price if it can make more proﬁt by selling more product. In this use, at a quantity of 3 and price of$150. the profit
is $450. If the monopoly is willing to lower its price to $140. it can then produc
Let's look at how you graphically illustrate the monopolistic ﬁrm.
You can see that. like the perfect competition graph. the average total cost (ATC) is roughly bowl-shaped and the marginal oost (MC) looks like the Nike® swoosh.
03.06 lnefﬁciency of the Monopoly Interactive Text Version
A Brief Introduction to Monopoly
The monopoly is a second business model that you will need to Know.
The best example of a monopoly is probably an electric company or another type of utility com
Suppose Ralph and Ed have the only store that sells toilet bowls in northern Maine. Their nearest competitor is 211 miles away. and these two men
have a reputation for producing high-quality toilet bowls. Graphically illustrate what the
Profit Maximization in a Monopoly
Here, we see all the curves we need in order to calculate proﬁt maximization. The monopoly ﬁrm, like all ﬁrms, will produce where MC=MR.
But. because of the nature of the curves. look at the price the consumer is willing