Entry 15: What is a Monopoly?

The three main characteristics of a monopoly would be that there is only one seller, a unique product and barriers to entry. Given the examples of the diamond industry, from companies such as Debeers, monopolies will set prices differently and have a different output than Perfect Competition. They will chose to set the number of diamonds where marginal cost equals marginal revenue and then charge the monopoly price at that point. Which at that point, will turn out to be the most money the monopoly can charge for that many diamonds. Many people believe that the consumers lose their surplus to the monopolies as it gets transferred in a monopolistic society, and with a higher price than a market with multiple firms, but actually the economists don't like is the lack of efficiency monopoly creates as certain monopolies aren't trying to maximize output, and therefore economists are trying to promote those monopolies in which the single seller will be more efficient than other people, as they are the most skilled, and the one that got there first. Monopolies can be good as if the average cost is decreasing in output, and there are advantages to large scale manufacturing and production, which is a monopoly, a one seller. Benefits of a monopoly includes innovation and research capabilities a monopoly can withstand, as they will have patents to protect their innovation and further more encourage more inventions, but they have the cost of having to be charged highly as there is only one seller in the market. I think it is not worth it to maintain a monopoly given that they have to spend their surplus earned from consumers on things such as more advertisements to pull in more consumers and therefore not receiving alot of surplus and will create an inefficiency in the market.