Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 5 Firm Behavior and the Organization of Industry
Chapter 15 of 36 - Monopoly
Section 2 of 32
…
Most computers use the Microsoft Windows operating system.
Microsoft has a copyright giving it the exclusive right to make and sell Windows.
If a person wants to buy Windows, they have no choice but pay Microsoft’s price.
Microsoft is said to have a monopoly in the Windows market.
…
The Windows market is not a competitive one, where
· there are many firms offering identical products
· each firm has little influence over the price it receives
A monopoly such as Microsoft has no close competitors, therefore the firm has the market power to influence the market price of its product.
A monopoly firm is a price maker, as compared to a competitive firm which is a price taker.
…
We will see market power alters the relationship between a firm's costs and the price at which it sells its product.
A competitive firm
· takes the price of its output as given by the market
· then chooses the quantity it will supply
· price equals marginal cost
A monopoly firm such as Microsoft charges a price higher than its marginal cost
…
The marginal cost of Windows is small, which is the extra cost Microsoft incurs when preparing it for download.
The market price of Windows is many times higher than marginal cost.
If the Windows market was competitive, the price of a copy would be driven down to the preparation cost.
…
Customers of monopolies might seem to have little choice but to pay whatever high price the monopoly charges.
So, why doesn’t a copy of Windows cost $1,000? or $10,000?
It is because the higher Microsoft sets the price, the fewer people buy Windows, approaching zero at $10,000.
People would switch to other operating systems or make illegal copies of Windows.
…
A monopoly firm can control the price or quantity, but not both.
Therefore the monopoly's profits are limited.
The goal of monopoly firms is to maximize profit, the same as competitive firms.
Because monopoly firms are unchecked by competition the outcome in a monopoly market is often not the best, lowest cost, one for society.
Government sometimes restricts monopolies with regulations, price controls, denying acquisitions of other companies, and breaking them into several smaller companies.
… …
monopoly company and competitive company
dokusen kigyō to kyōsō kigyō
独占企業と競争企業

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