smaller share of the total market for jewelry. A small town in the country may have only one gas station: is this gas

station a “monopoly,” or does it compete with gas stations that might be five, 10, or 50 miles away?

In general, if a firm produces a product without close substitutes, then we can consider the firm a monopoly

producer in a single market. However, if buyers have a range of similar—even if not identical—options available from

other firms, then the firm is not a monopoly. Still, arguments over whether substitutes are close or not close can be

controversial.

While a monopolist can charge anyprice for its product, nonetheless the demand for the firm’s product

constrains the price. No monopolist, even one that is thoroughly protected by high barriers to entry, can

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9.2 • How a Profit-Maximizing Monopoly Chooses Output and Price 223
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