Final answer:
A pure monopoly is characterized by the firm's ability to set its own prices, since it is a price-maker with no competition due to barriers to entry. To maximize profits, the monopolist will choose an output where marginal cost equals marginal revenue and set the highest price consumers will pay. Unlike firms in perfectly competitive markets that are price-takers, a monopolist enjoys considerable market power.
Step-by-step explanation:
One feature of a pure monopoly is that the firm is not price-taking, but rather a price-maker. This means that unlike a company in a perfectly competitive market, a monopolistic firm has the market power to set its own prices because it does not face competition from other producers. Barriers to entry in a monopoly market prevent other firms from entering and contesting the market share.
When choosing its profit-maximizing quantity of output, a monopoly analyzes its costs and revenues similarly to a perfectly competitive firm, considering total cost, fixed cost, variable cost, marginal cost, average cost, and average variable cost. However, the monopolist's decision-making process differs due to the lack of competition. It will select the quantity at which marginal cost equals marginal revenue (MC=MR), and then it will set the highest price that consumers are willing to pay for that quantity.
In conclusion, a pure monopolist capitalizes on its unique position in the market by maximizing profits through adjusting quantity and price, unaffected by the price-taking nature of perfectly competitive markets. Though the firm may aim to minimize costs, it is not driven to do this by competitive pressures. Instead, its cost-minimization efforts are in pursuit of achieving the greatest possible profits.