Monopoly+also+monopsony+-&nbsp;Be+able+to+apply+the+model

A monopoly is a situation in which there is __only one provider__ for a good or service in a market. A monopsony is a situation in which there is __only one buyer__ of a good or service in a market. Monopolies are characterized as being in a market in which there is only one seller, no close substitutes, and they are the price maker. An example of a monopoly may be a situation in which a new, technologically advanced drug or medical treatment comes out and there are no other competitors in the market. The new drug or medical treatment is able to be the price maker, since there are no other goods or services like it, it is also able to compete without any close substitutes due to being so technologically enhanced, and it is obviously the only seller due to again, the technological advancements it has achieved. Monopolies do not usually last very long though, due to government regulation and the constant competition in place in the market.



This model shows how equilibrium price and quanitity differ between a monopolist and a perfectly competitive market. The monopoly wants to operate where marginal cost (blue line) = marginal revenue (green line). This is where profit maximization occurs because producing and selling additional quantities beyond this point would result in marginal costs being greater than marginal revenues. Therefore, it supplies the quantity Qm and charges a price of Pm. As illustrated by the model, this is a price above the competitive price (Pc) and a quanity below the competitive quantity (Qc). The consumer surplus is the triangle highlighted in pink. Consumer surplus is the difference between the price consumers are willing to pay and the actual price. Producer surplus is highlighted in blue. This is the amount producers benefit by selling at a market price that is higher than the actual minimum price they would be willing to sell for. One example of a real world monopoly would be the United States Postal Service. Real world examples of monopolies are hard to come buy due to the government regulation of monopolies and Antitrust law. Antitrust law allows the government to break up monopolies, allowing the market to become more competitive. This helps out both the consumer and competitors trying to get into the particular market by lowering barriers and allowing for price competition.

What is the difference between a monopoly and a monopsony? ans: a monopoly has to do with only one seller and a monopsony has to do with only one buyer
 * __Questions__**

True or False- Monopolies can only increase quantity sold by lowering the price of the good they are trying to sell. ans: true, due to the downward sloping demand

Does a monopoly charge a higher price for a good than if the good were in a perfectly competitive market or not? ans: a monopoly charges a higher price for a good than the competitive market

In a monopoly does consumer surplus or producer surplus increase? ans: producer surplus increases while consumer surplus decreases, deadweight loss also becomes and issue when a monopoly is present

An example of a monopoly in the real world would be: A) the auto industry B) Walmart C) Nike D) United States Postal Service ans: D

What laws allow the government to regulate monopolies in the United States? A) Monopoly Laws B) Good Samaritan Laws C) Antitrust Laws D) All of the Above ans: C

Monopoly. (2007). In //Wikipedia// [Web]. Wikimedia Foundation, Inc.. Retrieved March 15, 2007, from http://en.wikipedia.org/wiki/Monopoly Santerre, R, & Neun, S (2007). //Health Economics//.Mason: Thomson Southwestern. Monopsony. (2007). In //Wikipedia// [Web]. Wikimedia Foundation, Inc.. Retrieved 04/15/2007, from http://en.wikipedia.org/wiki/Monopsony