Microeconomics For Dummies

Chapter 13

The Monopoly Game

In This Chapter

Understanding the monopolist mindset

Seeing why consumers and society lose out under monopoly

Combating monopolies

You can relax — despite its title, this chapter has nothing to do with the board game Monopoly and so you don’t have to pick whether to be the dog or the car or whatever. You don’t even have to explain why you didn’t choose the iron (no one ever does). You may, however, come away with some better ideas for how to win the game, if you ever find yourself playing it.

The kind of monopoly we’re interested in is the opposite of a competitive market (which contains many firms, none of whom has a significant market share): In a monopoly, one firm supplies the entire market. As you can imagine, when the production of a good is under monopoly control, there are plenty of consequences, most of which make economists quake in their boots.

In this chapter, we show you that a monopolist behaves differently from a firm in a competitive market and consumers lose out as a result. We also have a word or two about some of the other consequences of monopolies and how to deal with them in the real world. Plus, we describe the case of when a natural ...