Overview
Profit maximization in monopolies is a crucial concept in economics, where a single seller controls the market and sets prices to achieve the highest profit. Monopolies can influence prices significantly, often leading to higher costs for consumers and reduced choices. Understanding how monopolies o...
Key Terms
Example: The local water supply company is a monopoly.
Example: If producing one more widget costs $5, the marginal cost is $5.
Example: If selling one more widget brings in $10, the marginal revenue is $10.
Example: Airlines often charge different prices based on booking time.
Example: If a consumer is willing to pay $100 for a product but buys it for $80, the consumer surplus is $20.
Example: If a small price increase leads to a large drop in sales, demand is elastic.