A monopoly is a firm that is the only seller of a good or service that does not have a close substitute. In order to maximize profits, monopolies produce where: Marginal Revenue = Marginal Cost< Market Price.
- How does this compare to the profit maximization condition for perfectly competitive markets?
- How do these differences contribute to deadweight loss in a monopoly market?
- Can you think of reasons why a monopoly might decide on their own to increase production and lower prices to earn an acceptable profit rather than maximize profits?