Monopoly Short Run and Long Run Equilibrium of a Firm Under Monopoly

Monopoly Short Run and Long Run Equilibrium of a Firm Under Monopoly: When a firm and its product offers dominate one area or industry, it is referred to as a monopoly. Monopolies are an extreme outcome of free-market capitalism in which a single firm or group becomes big enough to possess all or almost all of the market (goods, suppliers, commodities, infrastructure, and assets) for a specific kind of product or service without any restrictions or limits. A monopoly is a legal word that refers to a company that has complete or near-complete control over a market.

Monopolies have an unfair advantage over their competitors since they are either the sole supplier of a product or control the majority of market share or consumers. Although monopolies range from one business to the next, they always have the following characteristics:

Monopoly Short Run and Long Run Equilibrium of a Firm Under Monopoly

High or no entry barriers: Competitors are unable to join the market, and monopolies may simply prevent competitors from establishing a footing in an industry by purchasing the competition.

When there is only one vendor in the market, the firm takes on the characteristics of the industry it serves.

Price maker: The monopolistic corporation sets the price of the goods it will sell without any competition, ensuring that prices remain stable. As a consequence, monopolies have the ability to increase prices whenever they choose.

Economies of scale: Monopolies may often produce at a cheaper cost than smaller businesses. Monopolies, for example, may purchase large amounts of merchandise at a volume discount. As a consequence, a monopoly may reduce its prices to the point where lesser rivals can no longer compete. Essentially, monopolies are able to participate in price wars because to the magnitude of their production and distribution networks, such as storage and shipping, which may be done at lower prices than any of the industry’s rivals.