ECN 104 Lecture Notes - Perfect Competition, Natural Monopoly
Document Summary
In a perfectly competitive market, there are many firms, none of which is large in size. In contrast, in a monopolistic market there is only one firm, which is large in size. This one firm provides all of the market"s supply. Hence, in a monopolistic market, there is no difference between the firm"s supply and market supply. First, there is only one firm operating in the market. These barriers are so high that they prevent any other firm from entering the market. Third, there are no close substitutes for the good the monopoly firm produces. Because there are no close substitutes, the monopoly does not face any competition. A barrier to entry is anything that prevents firms from entering a market. Many types of barriers to entry give rise to a monopolistic market structure.