what is a monopoly? how does it arise? and equilibrium in monopoly markets?

Question

in terms of short run and long run equilibrium

Answer 1

monopoly = only one producer and many consumers

It arises because nobody else can make same thing as monopolist, either b/c they do not have technology or resources, or there is patent protection, or there are high entry costs ("natural monopolies" such as with railroads and home utilities)

Equilibrium quantity is set determinedsame MR=MC rule as is competition, but monopolist quantity is usually way lower than competitive one.

In the long run, only "natural monopolies" are sustainable. In other cases, other firms will find a way to enter the market and start some competition. Even "natural monopolies" are not that protected - look what cell phones did to land-line phones.

Answer 2

Unfortunately, some of what Darth Severus wrote was wrong.

Monopolies can arise in many different ways, but the most common is by government fiat of one form or another. Patents are one form of government supported monopoly, franchises for various services (bus routes, utilities, etc.) are another.

But long before these, various governments have instituted monopolies in various direct forms. For example, the Chinese government had a monopoly on salt back in 758, the French government had one too, starting in 1286.

In the U.S. the State of New Hampshire has a monopoly on the sale of alcoholic beverages within its borders, etc.

Because many monopolies are government run or controlled, the classic equilibrium theory for monopoly markets does not generally hold - government rarely act as rational economic actor the way theory says they should.

Even for the private monopolies, the classic theory assumes that a monopoly can only sell at one price. This is clearly not true for monopolies such as those for DVDs and drugs, where the same product can be sold at different prices in different countries. (Think about the recent articles about Americans trying to import drugs from Canada, etc.)

For the classic answers to your questions, you can check out:
http://en.wikipedia.org/wiki/Monopoly

but keep in mind that this is a gross over-simplification of reality.

Answer 3

that's totally useful in case you're invoice Gates because you could rigidity everybody to apply your crappy working device it relatively is so overly complicated and power ingesting which you have the urge to tug your hair out. that's no longer so useful in case you are the only pulling your hair out.