Monopoly

Monopoly is one of the market structure. A monopoly exists when single firm controls the entire output of an industry. The sole supplier of a good for which there is no close substitute.
The feature of monopoly

• single firm


• high barriers to entry


• no close substitute


• price maker
  

The firm produce the output at where MR=MC, charge price at P to achieve supernormal profit.
In competitive market, MC=AR price would be lower at Pc and output wold be higher than Qc. Net welfare for consumer is higher.

In a perfect market, the market equilibrim will be at point X where MC=AR, That's supply meets demand.n price at Pc and output Qc.


The disadvantages of monopoly:

• The monopolist is not producing at the lowest point of AC curve, though produce efficiency is not achieved, allocative efficiency is not achieved either since the price charged to consumers is greater than the marginal profit.
• consumer surplus is being reduced
• monopolist could be monopoly power to create barrier to entry and operate price discrimination.

the advantages of monopoly:

• Dynamic efficiency is being achieved in the long run. firms are able to invest, innovate and develop to protect market position.
• If monopoly benefits from economic of scale, long tun average cost is reduced.