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AGRICULTURAL ECONOMICS 



135. MONOPOLY PRICE 1 

 BY HENRY ROGERS SEAGER 



Monopoly means usually in economics such control over the supply 

 of an economic good as enables the monopolist to regulate its price. 

 Monopolists, so far as they are free to obey the dictates of self- 

 interests, tend to fix those prices for their products which will yield 

 the largest monopoly profits. Just what this means may be made to 

 appear from a simple illustration. 



Consider the case of a patented article in genereal use, like a 

 special brand of soap. As a rule, the expense of producing such an 

 article diminishes as the number of units produced increases. On the 

 other hand, hi accordance with the familiar law of demand, as the 

 number of units offered for sale is increased the price that can be 

 secured for each unit decreases. Suppose that the volume of sales 

 at different prices, the expense of production per unit for these different 

 quantities sold, and the monopoly profits received are as represented 

 in the accompanying table. It is clear from the study of this table 

 that, on the conditions assumed, the price that affords the maximum 



monopoly profit will be somewhere between nine and ten cents. 

 Until the price, ten cents, is reached, the larger volume of sales and 

 diminishing expense per unit more than counterbalance the loss due 

 to lowering the price. Below nine cents the loss in price is no longer 

 offset by these other factors, although they continue to operate, and 

 consequently profits decline. As this table indicates, monopoly price 



1 Adapted from Principles oj Economics, pp. 213, 219-20. (Copyright by 

 Henry Holt & Co.) 



