What's The Deal Dirk?
Student Q&A's with Dirk
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I understand the monopolists have a great deal of market power. Does that mean that they always make a profit?
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It sure does seem like that should be the case. A monopolist enjoys high barrier to entry, no direct competition, and they sell a good that does not have close substitutes. All of that argues for the ability to make a profit, but they are not guaranteed because the monopolist does not control demand. There’s no profit if consumers don’t want the product, no matter how many producers you have.
Also, regulated monopolies often experience losses when the government sets low per-unit to prices to subsidize consumers.
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