February 2016
Beginner to intermediate
500 pages
33h 40m
English
A monopoly has market power, which is the ability to significantly affect the market price. In contrast, no single competitive firm can significantly affect the market price.
A profit-maximizing monopoly charges a price that exceeds its marginal cost. The extent to which the monopoly price exceeds marginal cost depends on the shape of the demand curve.
If the monopoly faces a highly elastic—nearly flat—demand curve at the profit-maximizing quantity, it would lose substantial sales if it raised its price by even a small amount. Conversely, if the demand curve is not very elastic (relatively steep) at that quantity, the monopoly would lose fewer sales from raising its price by the ...