Pure Monopoly: a market structure in which:

• one firm sells a unique product - no substitutes
• entry is blocked
  • the single firm (control over product price)
  • However, still needs to deal with customers
  • They have considerable (not whole) control over price.
  • nonprice competition

Characteristics:
Single Seller: only one firm = industry = monopoly.

• Demand curve is the demand curve for industry and firm

No close substitute: As a monopolistic firm is the only firm producing a certain product, there are no substitutes that can compete with the firm's product. - unique product
Price Maker:The pure monopolist controls the total quantity supplied and price.

• Increase and decrease output to control price

Blocked entry:Barriers to entry keep potential competitors from entering the indutry, thus there are no immediate competitors.

• Economies of scale--difficult for new, small firms to compete with the monopoly's low ATC
• Legal protection in forms of patents, licenses, and copyrights
• Strategic pricing--monopoly's power to adjust price and run at short term losses in order to outcompete new competitors
• Control of essential resources

Nonprice competition:The product produced by a pure monopolist may be either standarized (as with natural gas and electricity) or differentiated (as with Windows or Frisbees). Nonprice competition (i.e. advertisement)

Examples of Monopoly:

• Government owned/regulated public utilities (i.e. natural gas, electric companies, water, cable TV, local telephone company)
• (NaturalNatural Monopolies)Monopolies => Professional sports teams - they are the only suppliers of a particular service.
• • e.g. There is only one major league baseball team in Seattle, and only one professional basketball team in Utah. GO JAZZ!!!!!!!!
    

Dual Objectives of the Study of Monopoly:

1. We study the monopoly because it is a unique market structure
2. Monopolies help us to understand the more common market stuctures of monopositic competition and oligopoly