Characteristics of a monopoly

 There is only one seller in the market

 Entry in the industry is restricted or completely blocked
 The individual film is the price maker
 Products produced are unique
 Demand curve is downward sloping-inelastic
 In the monopoly market, factors like government license, ownership of resources, and high
starting cost make an entity a single seller of goods
 Monopolies also possess some information that is not known to other sellers.

Advantages of a monopoly

 Stability of prices – prices are stable since there is no competing product

 Economies of scale – since there is a single seller in the market it leads to economies of scale
o Economies of scale – the larger the business the lower its cost
 Research and development – since monopolists are making normal profits, the firm can invest
money into research and development that will lead to enhance consumer satisfaction

Economies of Scale

 Internal economies of scale cut cost in the business

- Technology
- Buying power
- Financial
 External economies of scale originate

Disadvantage of a monopoly

 Higher prices – monopolist could set a very high price since they have no option but to but it
from the seller due to lack of competition in the market
Price discrimination

 There are three conditions for the price discrimination:

o FIRST DEGREE
 Alternatively known as perfect price discrimination, occurs when a firm
separates the market into each individual consumer and charges them the price
they are willing and able to pay.
o SECOND DEGREE
 Charging a different price for different quantities, such as quantity discounts for
bulk purchases
o THIRD DEGREE
 Charging different prices to different consumer groups. Meaning, price are
charged for different markets that break the market into few sub markets.