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Depends on how you define monopoly. The analysis is intended to cover any business that faces a downward sloping demand curve. That is, any one who is not a pri
by T_S_ 16y ago
Depends on how you define monopoly. The analysis is intended to cover any business that faces a downward sloping demand curve. That is, any one who is not a price-taker. A monopoly certainly does.
- jessriedel 16y ago> The analysis is intended to cover any business that faces a downward sloping demand curve. That is, any one who is not a price-taker. Those are two different things. The vast majority of demand curves are downward sloping. (The exception being products which show strong network effects.) The key thing about a monopoly is that it is a price-setter, not a price-taker.
- T_S_ 16y agoI'll be more specific. In microeconomics (aka price theory), a monopolist is the sole supplier of a good or service at a time/place/condition. The monopolist faces a downward sloping supply curve. In a competitive equilibrium the supply/demand picture we all know is meant to cover an entire industry, while each seller acts as a price taker (same as a horizontal demand curve). In reality, as you point out, each firm has at least some pricing power, for various reasons, and so from a theoretical perspective they are a monopolist in some good or service defined in the right way. However, In common and legal usage they are not a monopolist.