journal topic #15: What is a monopoly

Journal Topic #15: What is a Monopoly

A monopoly usually has 1 seller in a market, a unique market with no close substitutes, and barriers to prevent entry. A monopoly wants to maximize profit, so they produce at the point where marginal revenue is equal to marginal cost, and they charge the most that they can for it, the monopoly price. A monopolistic firm can keep on earning economic profit in the long run, because there are barriers to entry and the economic profit will not fall definitely. The benefit to society is the variance that they get out of this, monopolies are encouraged to constantly innovate their products in order to keep earning economic profit, and the public gets better products to buy. A monopoly transfers consumer surplus to producer surplus. But economists don't think that this is wrong, they find fault with inefficiency, which arises because of the barrier to entry. Monopolies can also be good when they produce a product at the lowest possible cost and are able to sell to the consumers at a lower price than their competitors, this is called a natural monopoly. I don't think that it is worth it if the monopoly has to keep on spending all of their money to keep the monopoly, the money seems wasted.