In this week I will talk about the monopoly which is a firm that is the sole seller of a product without close substitutes. And the main cause of monopolies is barriers to entry. There are sources of barriers to entry which is a single firm owns a key resource the government gives a single firm the exclusive right to produce the good. Why Monopolies Arise? Because of a Natural monopoly: a single firm can produce the entire market Q at lower ATC than could several firms. HOW MONOPOLIES MAKE PRODUCTION AND PRICING DECISIONS? We can say Monopoly versus Competition, Monopoly is Faces a downward-sloping demand curve, Reduces price to increase sales. And we have Competitive firm and those are Is one of many producers, Faces a horizontal demand curve, Is a price taker and Sells as much or as little at same price.
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