Monopoly graph
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![monopoly graph monopoly graph](https://cdn.kastatic.org/ka-youtube-converted/A_lV-XArVeE.mp4/A_lV-XArVeE.png)
The cookie is used by cdn services like CloudFlare to identify individual clients behind a shared IP address and apply security settings on a per-client basis. These cookies ensure basic functionalities and security features of the website, anonymously. Necessary cookies are absolutely essential for the website to function properly. Therefore, monopoly does not always lead to inefficiency. The supernormal profit can enable more investment in research and development, leading to better products.Ī firm may gain monopoly power because it is very innovative and successful, e.g. In industries with high fixed costs, it can be more efficient to have a monopoly than several small firms. A monopoly can increase output to Q1 and benefit from lower long-run average costs (AC1). If a firm is in a competitive market and produces at Q2, its average costs will be AC2. For example, supermarkets squeezing prices paid to farmers. Monopolies may use their supernormal profits and monopsony power to pay lower prices to suppliers. Lack of competition may also lead to improved product innovation. – higher average costs because it gets too big
![monopoly graph monopoly graph](https://www.economicsdiscussion.net/wp-content/uploads/2015/05/clip_image00237.jpg)
![monopoly graph monopoly graph](https://www.economicshelp.org/wp-content/uploads/2012/11/monopoly-diagram-2017.png)
![monopoly graph monopoly graph](http://2.bp.blogspot.com/-lphSf8NPx10/T4fLfK_juSI/AAAAAAAAAjk/vchJb6VokcM/s1600/monopoly.png)
This leads to a decline in consumer surplus and a deadweight welfare loss Higher prices Higher price and lower output than under perfect competition.Blue area = Deadweight welfare loss (combined loss of producer and consumer surplus) compared to a competitive market.Red area = Supernormal Profit (AR-AC) * Q.Compared to a competitive market, the monopolist increases price and reduces output.This will be at output Qm and Price Pm.A monopolist will seek to maximise profits by setting output where MR = MC.