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Why is there no supply curve in a monopolistic market?

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Quick Answer

There is no supply curve in a monopolistic market because the monopolist searches the market demand curve for the profit maximizing price, rather than simply accepting the market price. Because there is only one seller, the monopolist has market power.

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Why is there no supply curve in a monopolistic market?
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Full Answer

Economists recognize four market structures: perfect competition, monopolistic competition, oligopoly and monopoly. Perfect competition and monopoly are opposite structures. Under perfect competition, there are many sellers who sell a uniform product to buyers, who have complete market information. Individual sellers have no control over price and face traditional downward sloping demand and upward sloping supply curves. The markets for agricultural products, such as corn and soybeans, are examples of perfectly competitive markets.

In contrast, a monopoly has only one seller. High barriers to entry such as regulatory hurdles, high capital requirements and technological advantages prevent competitors from entering the market. The monopolist determines its profit maximizing price, and then supplies a quantity of goods that allows it to achieve that price. Thus, there is no supply curve. The power company in a given area and professional sports teams are examples of monopolies.

Because of the ability to extract excess profit from a market, monopolies are undesirable. Governments pass laws to prevent monopolies and, when inevitable, regulate their power.

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