Chapter 15 discussed the behavior of firms that have control over the prices they charge, or monopolies (which is different than the last chapter which discussed firms in competitive markets, or price-takers). A monopoly arises when a single firm owns a key resource (monopoly resources), when the government gives a firm the exclusive right to produce a good (government-created monopolies), or when a single firm can supply the entire market at a smaller cost than many firms could (natural monopolies). These are called barriers to entry.
Because a monopoly sets its own price, its demand curve is downward sloping (if it wants to sell more output it must accept a lower price. Why is that?) Monopolies are limited in that they can only pick a point (price and quantity outputted) on the demand curve; therefore, is a monopoly really desirable? How does this affect profit, as it is assumed a firm's main goal is to maximize profit?
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