Department of Justice uses.Įven though there are very few true monopolies in existence, we do deal with some of those few every day, often without realizing it: The U.S. This tends to be the definition that the U.S. While a monopoly, by definition, refers to a single firm, in practice people often use the term to describe a market in which one firm merely has a very high market share. Since a monopoly faces no significant competition, it can charge any price it wishes, subject to the demand curve. In the case of monopoly, one firm produces all of the output in a market. If perfect competition is a market where firms have no market power and they simply respond to the market price, monopoly is a market with no competition at all, and firms have a great deal of market power. In this chapter, we explore the opposite extreme: monopoly. Think about it this way: If you very much wanted to win an Olympic gold medal, would you rather be far better than everyone else, or locked in competition with many athletes just as good as you? Similarly, if you would like to attain a very high level of profits, would you rather manage a business with little or no competition, or struggle against many tough competitors who are trying to sell to your customers? By now, you hopefully have read chapter 7. Many believe that top executives at firms are the strongest supporters of market competition, but this belief is far from the truth. 8 Monopoly 8.1 An Introduction to monopoly
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