Explain how monopoly arises and distinguish between single-price monopoly and price-discriminating monopoly.
In monopoly, a single producer of a good or service that has no close substitutes operates behind a natural, legal, or ownership barrier to entry.
A monopoly can price discriminate when there is no resale possibility.
Where resale is possible, a firm charges a single price.
Explain how a single-price monopoly determines its output and price.
The demand for a monopoly’s output is the market demand, and a single-price monopoly’s marginal revenue is less than price.
A monopoly maximizes profit by producing the quantity at which marginal revenue equals marginal cost and by charging the maximum price that consumers ...