ARJUN AUL.

ECONOMICS

12017628 BCOM ll SEMESTER

RQ2018B55
 What is Monopoly ?
I. A monopoly refers to when a company
and its product offerings dominate a
sector or industry.

II. Monopolies typically have an unfair

advantage over their competition since
they are either the only provider of a
product or control most of the market
share or customers for their product.

III. Although monopolies might differ from

industry-to-industry, they tend to share
similar characteristics that include

HIGH ECONOMICS
BARRIER OF SCALE
OF ENTRY
Price
Maker
SINGLE
SELLER
 COMPETITORS ARE NOT ABLE TO ENTER THE
MARKET, & THE MONOPOLY CAN EASILY PREVENT
COMPETITION FROM DEVELOPING THERE FOOT
HOLD IN AN INDUSTRY BY ACQUIRING THE
COMPETATION

THERE IS ONLY ONE SELLER ON THE MARKET,

MEANING THE COMPANY BECOMES SAME AS THE
INDUSTRY IT SERVES.
 THE COMPANY THAT OPERATES THE MONOPOLY
DECIDES THE PRICE. OF THE PRODUCT THAT IT WILL
SELL WITHOUT ANY COMPETATION KEEPING THEIR
PRICES IN CHECK. AS A RESULT MONOPOLIES CAN
RAISE PRICES AT WILL.

A MONOPOLY CAN OFTEN PRODUCE AT A LOWER COST THAN OFTEN COMPANIES.

MONOPOLIES CAN BUY HUGE QUANTITIES OF INVENTORY, FOR EXAMPLE USUALLY
A VOLUME DISCOUNT. AS A RESULT A MONOPOLY CAN LOWER ITS PRICES SO
MUCH THAT SMALLER COMPETITATOR CAN’T SURVIVE. ESSENTIALLY MONOPOLIES
CAN ENGAGE IN PRICE WARS DUE TO THE SCALE OF THEIR MANUFACTURING &
DISTRIBUTION NETWORK SUCH AS WARE HOUSING & SHIPPING, THAT CAN BE
DONE AT LOWER COST THAN ANY OF COMPETITOR IN INDUSTRY.
 MONOPOLY is the
market where there is
only a single seller
who the only owner of
the firm
THE PRODUCTS ARE DECIDED
AS PER HIS CHOICE.
THE PRODUCTS ALSO DO NOT HAVE
A CLOSE SUBSTITUDE OF EACH
OTHER
Entry of a new firm is also
restricted in Monopoly.

BUT HOW ???

ENTRY OF A NEW FIRMS IS RESTRICTED
THROUGH BARRIERS LIKE.

ECONOMICS
OF SCALE
CONTROL
OVER
PHYSICAL
RESOURCES
PREDETOR
PRICING

PATENT

TRADE
MARK

COPYRIGHT
THE DIAGRAM SHOWS HOW MONOPOLY IS ABLE TO
MAKE SUPER-NORMAL PROFITS IN LONG RUN

BECAUSE THE PRICE (AR) IS GREATER THAN AC.

AR>AC
 USUALLY SUPERNORMAL PROFIT
ATTRACTS NEW FIRMS TO ENTER THE
MARKET

BUT THERE
ARE BARRIER
TO ENTRY IN
MONOPOLY

IN LONG RUN IN
MONOPOLY
PRICE & PROFITS
CAN REMAIN
HIGH.
THIS ENABLE THE
MONOPOLIST TO
KEEP EARNING
SUPERNORMAL
PROFITS