What is the Monopoly Market Structure?

When one sees an industry where there is only one firm in the industry, this is referred to as a monopoly. 

When looking at monopolies, the first assumption is that only one firm in the industry produces the product, implying they control the industry. Secondly, barriers to entry exist and are usually high, discouraging the competing firms from entering the industry. Consequently leading to the third assumption, where firms have the ability to make supernormal profit in the long run.

Barriers to entry create a high stain on the competing firms. This includes economies of scale where the firm has gained specialization, financial economies, and discounted purchases, all leading to lower costs. The economies of scale are exceedingly high compared to a small firm entering the business. With this knowledge, most firms dis-incentivized to enter the industry. 

Regarding the product, monopolies could have the incentive to spend time and money on research and development (Blink, Dorton). In reality, monopoly markets can lead to complacent firms and backward products. Monopolies create brand loyalty, making their consumers would remain loyal.  This disadvantage allows firms to provide consumers services lower than what they deserve; in result, consumer demand isn’t being met. The lack of other markets leads to a lack of diversity and consumer purchasing power, as they have limited variety.

With monopoly , none of the efficiencies are met. The market isnt productively efficient , where MC=AC, causing quantity to be lower than it should, and price rises. It isnt allocatively effiecient, where MC=AR and so the quantity (Qe) is less than what should be produced. The government deems these monopolies against the interest of the consumers, for reasons stated above. 

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