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PPGPortal > Home > Concept Dictionary > K, L, M > Monopoly


An industry structure when there is only one firm in the market.

(Dwayne Benjamin, Toronto PPG 1002H)


Monopolists use their power over the market to choose the level of price and output that maximizes overall profit. In a monopoly situation, the firm is still constrained by the demand behaviour of consumers. In a perfectly competitive market, price is equal to marginal cost. In a monopoly market, the monopolist uses his market power to control quantity and thereby enables himself to sell above his product above the marginal cost. This is called the “markup pricing” of a monopoly. The extent to which the monopolist is able to “markup” prices is determined by the elasticity of demand for his product.


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