1. Monopoly versus Perfect Competition
No Monopolies!
Monopoly versus Perfect Competition

2. Monopoly vs. Perfect Competition
Monopolies charge a higher price & provide lower Qty
Monopoly charges a Price > MC
Competitive firms: Price = MC
Monopolies create deadweight loss to society
Competitive firms: no deadweight loss

3. Market Demand Curve
The market for T-Shirts could be a monopoly or a competitive industry.
The market demand curve for T-shirts is exactly same whether an industry is a monopoly or a competitive industry.
1-T-shirt Firm

4. Competitive Firm vs. Monopoly
All profit-maximizing firms set: MR =MC
Competitive firms: P = MR = MC
Short Run: Economic Profit or Loss
Long Run: Zero economic profit (min ATC)
No DWL (P = MC)
Monopoly firm = P > MR = MC
Short Run: Economic Profit or loss
Long Run: Economic Profit
DWL as P > MC

5. Sample Monopoly Equilibrium
Costs and
Profit can last due to
difficult entry/exit
Revenue
Maximize Profit set MR = MC D MR MC
ATC P1 Q1 E1
Monopoly
profit
To Maximize Total Revenue:
Set MR = 0 so Ed = 1
ATC
Quantity

6. Pure Monopoly Worksheet