The monopolist faces a downward-sloping demand curve (D in Fig. Unlike a perfectly competitive producer (see PERFECT COMPETITION), however, the monopolist's marginal and average revenue curves are not identical. In static monopoly, the monopolist is in a position to set the market price.
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On the other hand, MARKET CONCENTRATION may lower industry supply costs by enabling firms to take advantage of ECONOMIES OF SCALE, and it is to be noted that governments go out of their way to encourage patent monopolies (see PATENT) as a means of encouraging innovation. Worse still, monopolists may abuse their market power both with respect to consumers (for example, by charging excessive prices), and actual and potential competitors (for example, by depriving them of market access through EXCLUSIVE DEALING practices). Monopoly is often depicted as an inefficient form of market organization since the lack of effective competition tends to remove the monopolist's incentive to reduce industry supply costs.
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In practice, the term ‘monopoly’ is usually given a wider interpretation, particularly within the context of COMPETITION POLICY, to cover DOMINANT FIRM situations and COLLUSION between rival suppliers. monopoly a MARKET STRUCTURE characterized by a single supplier and high barriers to entry. Copyright © 2003 by Houghton Mifflin Company. Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L.