Monopoly

We have seen that P-Competition has some remarkable results. As we have seen, P-competition defines an ideal market structure in two senses: 1) in P-competition, price competition dominates all other forms of competition and forces the price to the supply-and-demand equilibrium, and 2) at that price and the corresponding output, marginal benefit is equal to marginal cost, so the allocation of resources is efficient -- net benefits are maximized.

But it seems unlikely that all industries are P-competitive, even approximately. We expect to find P-competition in industries that (among other characteristics) have many small sellers. But we observed some industries (cable TV, for example) in which there is only one seller in a particular local market, and other industries in a whole spectrum from one to few to many sellers. P-competition is the many-small-sellers extreme of that spectrum.

Now we consider the opposite extreme: a monopoly. By definition, a monopoly is the only seller of a product for which there is no close substitute. It is an industry in which there is only one firm -- or., conversely, a firm that has the whole industry to itself.