A monopoly is defined as an entity that comprises of a single seller and many buyers. Since the seller consists of only one firm, the firm can effectively and efficiently influence the price level for its product(s) in the monopoly market. In this case, the buyers are regarded as price takers because they buy the product provided by the monopoly in the market at the price offered by the monopoly. The monopoly can therefore dictate the price level, thereby charging high prices and consequently making supernormal profits. The functionality of a monopoly is based on the one firm or the ...
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