In: Economics
Chapter 11 discusses the monopolistic and oligopolistic markets. Can you describe the basic characteristics of a monopoly? Is it subject to any competitive pressures?
BASIC CHARACTERISTICS OF A MONOPOLY
Monopoly is not subject to any competitive pressure as it is the only single producer in the market for its product. Economies of scale can combine with the size of the market to limit the competition. Even if the second firm attempts to enter the market by producing a small quantity, its average costs turn out to be higher than the existing firm in the market and thus will make it unable to compete and drive it out of the market.