Monopoly profit

[8]By contrast, the lack of competition in a market ensures the firm (monopoly) has a downward sloping demand curve.

The price and output are co-determined by consumer demand and the firm's production cost structure.

[4] Under normal market conditions for a monopolist, this monopoly price is higher than the marginal (economic) cost of producing the product, indicating that the price paid by the consumer, which is equal to their marginal benefit, is above the firm's MC.

[1][4][2] Normally, a firm that introduces a brand new product can initially secure a monopoly for a short while.

[1][4][2] When consumers have complete information about the prices available in the market and the quality of the products sold by the various firms, there cannot be a persistent monopolistic situation in the absence of barriers to entry and collusion.

[1][2][9] Various barriers to entry include patent rights[1][4] and the monopolization of a natural resource needed to produce a product.

[1][4][2] The American firm Alcoa Aluminum is a historical example of a monopoly due to natural resource control; its control of "practically every source of bauxite in the United States" was one key reason that "[it] was, for a long time, the sole producer of aluminum in the United States".

[10] Competition laws were created to prevent powerful firms from using their economic power to artificially create the barriers to entry they need to protect their monopoly profits,[4][2][3][6] including the use of predatory pricing toward smaller competitors.

[1][3][5] In the United States, Microsoft Corporation was initially convicted of breaking competition laws and engaging in anti-competitive behavior to form a barrier in United States v. Microsoft Corporation; after a successful appeal on technical grounds, Microsoft agreed to a settlement with the Department of Justice in which they were faced with stringent oversight procedures and explicit requirements[11] designed to prevent the predatory behavior.

[4][2] The old AT&T monopoly, which existed before the courts ordered its breakup and tried to force competition in the market, had to get government approval to raise its prices.

Individual competitive firms (on the extreme left and extreme right) are price takers, who are forced to accept the overall equilibrium price set by total consumer demand and the quantity all firms supply within the industry's market. The industry's market supply and demand show a graphical depiction of the interaction between all suppliers of the product and all consumers who may wish to purchase the product, and the decisions they make at any possible price. [ 4 ] [ 2 ] [ 6 ]
Monopoly Price and Output
A monopolist will set a price and production quantity where MC = MR, such that MR is always below the monopoly price set. A competitive firm's MR is the price it gets for its product, and will have its price equal to MC.
Introducing new competition in what was previously a monopoly removes monopoly profit. Only two firms are shown here to make illustration of the additional competition easier. In normal circumstances, it takes more than two firms to form a competitive situation, and having only two firms forms a duopoly .
Government regulations of the price the monopoly can charge reduce the monopoly profit, but do not eliminate it.