Chapter monopoly
LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. Explain what is a monopoly firm by assessing its characteristics;
2. Explain whether there is a difference between the industry
demand curve and a firm demand curve of a monopoly;
3. Examine how price and output maximising profit of a monopoly
are determined; and
4. Discuss four situations of short-run equilibrium for a monopoly.
Definition of monopoly
Definition : Pure monopoly is a market
structure where there is only one firm selling
goods which has no close substitutes.
Characteristics of monopoly
(a) There is only one firm in the market (sole seller/producer)
and there are many buyers.
(b) Price maker : The firm has absolute power in determining the
market price or quantity produced. The monopolist has the
power to determine the price level because there is no
competition. Nevertheless, if the monopolist wants to sell a
