2.

Pure Monopoly

- Is an industry with only one seller.

- Such a company should have

considerable ability to affect the price that it
charges.
However, for this to occur,
Three other characteristics are necessary

1. There must be high barriers to entry.

2. The demand for the product needs to be

relatively inelastic (that is, has few
substitutes).

3. There are high barriers to entry.

The Social Problems of Monopoly

Why monopoly is bad for societies as a whole?

1. In perfect competition, companies could earn economic
profits in the short-run but not in the long-run.
2. In perfect competition companies would produce the
quantity being produced as efficiently as possible in
the short-run.
3. In perfect competition, companies also had
incentives to find ways to lower costs over time and to
find ways to “improve” the products they sell.
3. Monopolistic Competition
- If there is one seller but a very elastic demand
for the product the industry is called monopolistic
competition.
Characteristics of monopolistic
competition

1. There are many sellers.

2. The buyers and sellers have
perfect information.
3. There are no barriers to entry.
4. The products are differentiated .