Monopoly
Market Failure: Market Power
Syllabus requirement
Single or dominant firm, high entry barriers, no close substitutes. Includes abnormal profits, allocative inefficiency, and welfare loss. Also covers natural monopoly.
Summary
This extract explains monopoly as a market structure with a single supplier that has the power to influence price and supply, supported by high barriers to entry and the absence of close substitutes. It introduces the BLADE barriers (branding, legal barriers, anti-competitive practices, domination of resources, economies of scale) and shows how these sustain market power and price inelastic demand. It contrasts monopoly with other imperfectly competitive structures, outlining key features of oligopoly and monopolistic competition. It also defines revenue concepts (revenue, total revenue, average revenue) used in analysing firm behaviour and profit outcomes.
