... mark up the firm uses is the fact that there is no competition therefore the monopolistic firm can charge the higher price. In comparison with perfect competition, which we will look at later, a monopolist produces a lower output at a higher price assuming, no changes in demand function and no changes in (marginal) costs. If the monopolist exploits significant economies of scale and or makes improvements in technology these may result in lower costs. A monopolist may also reduce it's price so that it makes a short term loss on profits in order to stop new firms entering the market. This short term sacrifice on supernormal profits reduces any potential competition from new firms which results in the firm earning large long term profits. This can be shown in the following diagram: In an Oligopolist market, it competes with many other firms. The firm is said to be interdependent and ...

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