1.Pure monopoly is a market situation in which there is a single seller of a product
with no close substitutes.
2.The monopoly firm faces a negatively sloped demand curve and a marginal revenue curve that lies below that demand curve.
3.The monopolist maximizes profits by producing the output at which MC=MR and sets the price at which exactly that output can be sold. Since price is often greater than average than average cost in the monopoly case, economic profits often exist.
4.The monopolist is sometimes able to erect barriers to entry which allow profits to exist in the long run. These barriers are very difficult to maintain and, as a result, monopolist often appeal to the government for help in maintaining entry barriers.
5.Monopolies produce a lower output at a higher price than do competitive firms.
At equilibrium, the monopoly firm is producing at a level of output where P≠AC≠MC.
6.Monopoly power is not a guarantee of profits. Some monopolies go out of business because of persistent losses; others make only normal profits.
7.A monopoly can increase its revenues if it practices price discrimination. For price discrimination to be successful, the monopolist must have customers with different demand elasticities and they must be separated and prohibited from reselling the product.
8.The satisficing hypothesis and the sales maximization hypothesis are both derived from the idea of the separation of ownership and control. They argue that hired managers, as opposed to owner-managers, attempt to maximize sales or meet satisfactory profit targets rather than maximize profits.
9.Although no examples of pure monopoly exist, the model of pure monopoly is useful in analyzing monopoly power.
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