how can a firm enjoy monopoly in the market
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a monopoly is a market system where there is only one seller (prodecer) but many buyers (consumers).
a market, beginning off as a perfectly competitive market, can gradually become a monopolistic market by gaining profits, goodwill, large customer base and market share.
as market share increases, a firm gains more power on how the market operates. if the market is an imperfect competition, the firm can drive out its competitors by, for example, investing in Research and Development (R&D) to produce better quality products and gain more market share.
when the firm is a monopoly (1 producer, many consumer), it can set its own prices since now, the consumers have no other option than to buy from that firm. as a result, the firm becomes the price maker and the consumers become the price takers.
the firm, now setting its own prices, can easily earn supernormal profits.
a market, beginning off as a perfectly competitive market, can gradually become a monopolistic market by gaining profits, goodwill, large customer base and market share.
as market share increases, a firm gains more power on how the market operates. if the market is an imperfect competition, the firm can drive out its competitors by, for example, investing in Research and Development (R&D) to produce better quality products and gain more market share.
when the firm is a monopoly (1 producer, many consumer), it can set its own prices since now, the consumers have no other option than to buy from that firm. as a result, the firm becomes the price maker and the consumers become the price takers.
the firm, now setting its own prices, can easily earn supernormal profits.
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