Editing Imperfect competition (section)

=== Monopoly ===
{{Main|Monopoly}}

In a monopoly market, there is only one supplier and many buyers; it is a firm with no competitors in its industry. If there is competition, it is mainly some marginal companies in the market, generally accounting for 30–40% of the market share. The decisions of marginal companies will not materially affect the profits of monopolists. The monopolist has market power, that is, it can influence the price of the good. Moreover, a monopoly is the sole provider of a good or service and thus, faces no competition in the output market. Hence, there are significant barriers to market entry, such as, patents, market size, control of some raw material. Examples of monopolies include public utilities (water, electricity) and [[Australia Post]]. 
<ref name="123a">Robert Pindyck and Daniel Rubinfeld. [2013]. ''Microeconomics''. United States: Pearson India: 8th ed., (2017) {{ISBN?}} {{page?|date=February 2025}}</ref> A monopolist faces a downward sloping demand curve. Thus, as the monopolist raises its price, it sells fewer units. This suggests that when prices rise, even monopolists can drive away customers and sell fewer products. The difference between monopoly and other models is that monopolists can price their products without considering the reactions of other firms' strategic decisions.

Hence, a monopolist's [[Profit maximization|profit maximising quantity]] is where marginal cost equals marginal revenue. At this point:

* '''Output''' is below the level of a [[perfectly competitive market]]; but 
* '''Price''' is above [[marginal cost]].<ref name=kifle6/>

A firm is a [[Monopsonist]] if it faces small levels, or no competition in '''ONE''' of its output markets. A [[natural monopoly]] occurs when it is cheaper for a single firm to provide all of the market's output.<ref>{{cite book |title=Economics of the Public Sector |date=2000 |publisher=Joseph E. Stiglitz |location=New York |isbn=0-393-96651-8 |page=78 |edition=3rd}}</ref>

Governments often restrict monopolies through high taxes or anti-monopoly laws as high profits obtained by monopolies may harm the interests of consumers. However, restricting the profits of monopolists may also harm the interests of consumers, because companies may create unsatisfied products that are not available in new markets. These products will bring positive benefits to consumers and create huge economic value for enterprises. Tax and antitrust laws can discourage companies from innovating.<ref>{{Cite book |last=Besanko |first=David |title=Economics of Strategy |publisher=Hoboken, NJ : John Wiley & Sons |year=2012 |isbn=978-1-118-27363-0 |location=the United States |pages=176–177 |edition=6th |language=English}}</ref>