Answer to Question #279762 in Microeconomics for Sbuh

Question

Identify and explain any five characteristics of a monopoly

Answer 1

1.     Price discrimination: in a monopoly the firm can change the price and quantity of the good or service. In an elastic market the firm will sell a high quantity of the good if the price is less. If the price is high, the firm will sell a reduced quantity in an elastic market.

2.     In a monopoly, a single vendor produces all of a good's or service's output. A single company serves the entire market. For all intents and purposes, the firm and the industry are the same.

3.     A monopoly maximizes profits because it is a profit maximizer. Because there is no competition, a company can charge a higher price than it would in a competitive market, maximizing its revenue.

4.     High barriers to entry: other sellers are unable to enter the market of the monopoly.

5.     The monopoly determines the price of the commodity or service being sold. The price is established by determining the quantity required to demand the firm's targeted price (maximizes revenue).