perfect competition is no longer a reasonable description of how an industry works. When barriers to entry are

high enough, monopoly can result.

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9.2 • How a Profit-Maximizing Monopoly Chooses Output and Price 221

Barrier to Entry

Government Role?

Example

Government often responds with regulation

(or ownership)

Water and electric companies

Natural monopoly

Control of a physical

resource

Legal monopoly

No

Yes

Patent, trademark, and

Yes, through protection of intellectual

copyright

property

Intimidating potential

competitors

Somewhat

TABLE 9.1 Barriers to Entry

DeBeers for diamonds

Post office, past regulation of airlines

and trucking

New drugs or software

Predatory pricing; well-known brand

names

9.2 How a Profit-Maximizing Monopoly Chooses Output and Price

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Explain the perceived demand curve for a perfect competitor and a monopoly
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