Summary on Monopoly

Monopoly provides an important example of an exception to the Fundamental Principle of Microeconomics, in that there is not enough competition to push the price down to the supply-demand level. Indeed there is only one seller.

We have seen that a profit-maximizing monopoly will

produce less than a comparable P-competitive industry
charge a higher price
this output restriction is inefficient

However, if there are economies of scale, P-competition may simply not be possible, and the extreme case of "natural monopoly" leaves us with a choice of the least of three evils: public ownership, regulation, or deregulation.

Next Chapter: Imperfect Competition

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