![]() DeBeers has a monopoly in diamonds, but it is a much smaller share of the total market for precious gemstones and an even smaller share of the total market for jewelry. ![]() The Greyhound bus company may have a near-monopoly on the market for intercity bus transportation, but it is only a small share of the market for intercity transportation if that market includes private cars, airplanes, and railroad service. True, Microsoft in the 1990s had a dominant share of the software for computer operating systems, but in the total market for all computer software and services, including everything from games to scientific programs, the Microsoft share was only about 14% in 2014. Questions over how to define the market continue today. Supreme Court held that the broader market definition was more appropriate, and it dismissed the case against DuPont. In 1956, after years of legal appeals, the U.S. DuPont countered that even though it had a 75% market share in cellophane, it had less than a 20% share of the “flexible packaging materials,” which includes all other moisture-proof papers, films, and foils. In a famous 1947 case, the federal government accused the DuPont company of having a monopoly in the cellophane market, pointing out that DuPont produced 75% of the cellophane in the United States. The flat perceived demand curve means that, from the viewpoint of the perfectly competitive firm, it could sell either a relatively low quantity like Ql or a relatively high quantity like Qh at the market price P.Ī monopoly is a firm that sells all or nearly all of the goods and services in a given market. The demand curve as it is perceived by a perfectly competitive firm appears in (a). (The Clear It Up feature discusses how hard it is sometimes to define “market” in a monopoly situation.) Demand Curves Perceived by a Perfectly Competitive Firm and by a MonopolyĪ perfectly competitive firm acts as a price taker, so we calculate total revenue taking the given market price and multiplying it by the quantity of output that the firm chooses. However, because a monopoly faces no competition, its situation and its decision process will differ from that of a perfectly competitive firm. We can analyze the pattern of costs for the monopoly within the same framework as the costs of a perfectly competitive firm-that is, by using total cost, fixed cost, variable cost, marginal cost, average cost, and average variable cost. How will this monopoly choose its profit-maximizing quantity of output, and what price will it charge? Profits for the monopolist, like any firm, will be equal to total revenues minus total costs.
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