Name Krishnakant Mishra Rohan Haldankar Naresh Sirsulla Ashwini Patankar Vasim Momin Roll No. 73 66 103 83 76

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Introduction Types of Monopoly Power Features Monopoly Power Sources of Monopoly Power Equilibrium of Monopoly Firm Comparison Between Perfect Competition & Monopoly Advantages & Disadvantages Wastage Under Monopolistic Competition Conclusion

poly .What is Monopoly ? 1. A Monopoly is the sole supplier of a product with no close substitutes 4. Mono – one 2. The most important characteristic of a monopolized market is barriers to entry  New firms cannot profitably enter the market .organization (Indianapolis) 3.

In a pure or absolute monopoly a monopolist controls the entire supply of commodity for which there is no substitute at all. In Monopoly Market a Monopolist is a price maker and not a price taker like the perfectly competitive firm. A Monopolist can control both the supply and price. .INTRODUCTION Monopoly is another form of market where there is only one seller.

A weak Monopolist: Lacks confidence and is pessimistic as there is fear of competition . . no govt. intervention. Discriminating Monopoly: A Discriminating monopoly firm charges different prices from different buyers for the same product.Govt. e. Private monopolies: are owned and controlled by private individuals. It prevails in more than one market.g. Simple Monopoly: A simple Monopoly firm charges a uniform price to all buyers of its product. he charges his own price for his products with ought any fear for strong entry barriers for competition. so he charges less prices for his products.Types of Monopoly Power ¢ ¢ ¢ ¢ ¢ ¢ ¢ ¢ Pure Monopoly: It means single firm which solely controls the supply of a commodity.-Railways owned by the government. A strong Monopolist: Is confident and optimistic. there is no competition and he can charge any price for his products. it also known as absolute monopoly Limited Monopoly: limited monopoly means a single firm which controls the supply of the commodity having no close substitutes but there are remote substitutes. it operates in a single market. Public Monopolies: are owned and controlled by the government. They are profit motivated. intervention and adverse reaction of consumers. he can influence the price and demand for his product is relative inelastic.

Monopoly in Public Sector In India. Public utility service supplied by the government are the closest examples of Monopoly RAILWAY S BEST BUSES .

Monopoly in Food Items Canteen in Schools Snacks in Theatre .

Monopoly in Power or Energy GAS CYLINDER ELECTRICITY .

A monopolist is not threatened by any competitor.  No Close Substitutes : The commodity sold by Monopolist has no close substitute Cont. . He is the sole seller.FEATURES OF MONOPOLY  Single Seller : There are no competitors..

FEATURES OF MONOPOLY No entry : To monopoly market entry is completely restricted. . No distinction between firm and industry : A monopolist being the sole seller constitutes the firm as well as the industry. therefore there is no need for a separate discussion of equilibrium of industry. if entry is allowed or anybody succeeds to enter the market and produce a close substitute the monopolist will be no more a monopolist.

 Control over entire market supply: A monopolist has complete control over the market supply as he is the single producer.FEATURES OF MONOPOLY Price Maker: A Monopolist is price maker and not a price taker.  . He can fix his own price policy to maximize more profit. He can fix up the price of his product depending upon the demand position for the product in market.  Absence of competition: There is no competition for a monopolist’s product as he is the only seller ruling the market.

For e.-Jute in Bangladesh. Legal Protection : Legal Protection granted by the Govt.g. . Gold and Crude Oil.Copyrights.g. Kesar etc.Sources of Monopoly Power  Natural Resource: Some monopolies are due to nature.g. For E. entry of firms is restricted and it acquires monopoly power.. Control of Raw Materials: when a firm has ownership or control over essential raw materials.. in the form of E. Patent rights . License etc.Trademarks .   Cont.

to reduce new entry and competition to establish a monopolistic position. limit pricing policy etc. technology. Creation of artificial barriers to new competition: Firm may adopt tactics like heavy advertising. and can produce goods at low cost and supply at low prices which may confer them monopoly power. .Sources of Monopoly Power    Business Reputation: Reputed firms acquire monopoly power as they have no financial difficulties and they do not require extra efforts to attract the customers. Economies of large scale: Big and old firms enjoy the benefits of large scale production they have huge capital.

. Optimum production is possible if demand increases. Usually less than optimum. of Sellers Commodity Market Position Perfect Competition Very Large Homogeneous Price Taker Single Homogeneous/ Differentiated Price Maker Less elastic (Downward Sloping) AR > MR.Comparison Between Perfect Competition and Monopoly Characteristics No. Monopoly Nature of Demand Perfectly elastic (Horizontal Line) AR and MR Production AR = MR Optimum. Excess Price Discrimination. Long-run profit Nature of Price Normal Single price.

Free Entry attracts many firms compelling each firm to share the market with others. Unemployment : Excess Capacity Results in Unutilized resources which prevents providing more Employment. 4. 2. 3. Different colors and designs leads to wastage of resources which could have been used for other purposes. . 1. Cross Transport : Product differentiation leads to the demand for a variety of same good.WASTAGE UNDER MONOPOLISTIC COMPETITION Excess Capacity : Monopolistically competitive firm do not produce optimum Output. This could be avoided if the product produce in a particular area is sold there itself and consumers are satisfied with the varieties available in their locality. Wastage of Resources : Product differentiation by itself results in wastages of resources.

ADVANTAGE OF MONOPOLY  No risk of over production There is enough capital for research Reduction in price of goods Efficiently use of resources    .

    .e. when price is greater than marginal cost.DISADVANTAGES OF MONOPOLY  Exploitation of consumers Restriction of consumers choice Absence of competition leads to inefficiency Increase in price of product Exploitation of labor i.

Average and Marginal Revenue Under Monopoly .

Revenues for a firm facing a downward-sloping demand curve .

Revenues for a firm facing a downward-sloping demand curve .

Revenues for a firm facing a downward-sloping demand curve .

MR (£) 4 AR 2 Quantity 0 1 -2 2 3 4 5 6 7 .AR and MR curves for a firm facing a downward-sloping D curve 8 Q P (units) =AR (£) 8 1 7 2 6 3 5 4 4 5 3 6 2 7 6 AR.

AR and MR curves for a firm facing a downward-sloping D curve 8 Q P (units) =AR (£) 8 1 7 2 6 3 5 4 4 5 3 6 2 7 TR MR (£) (£) 8 6 14 4 18 2 20 0 20 -2 18 -4 14 6 AR. MR (£) 4 AR 2 Quantity 0 1 -2 2 3 4 5 6 MR 7 .

AR and MR curves for a firm facing a downward-sloping D curve 8 Elastic Elasticity = -1 6 AR. MR (£) Inelastic 4 AR 2 Quantity 0 1 -2 2 3 4 5 6 MR 7 .


SHORT – RUN EQUILIBRIUM Profit in Short-Run Equilibrium Loss in Short-Run Equilibrium .

PROFIT IN SHORT RUN CASE 16 MC Total Profit = £1.50 Costs and Revenue (£) 12 AC 8 6.50 4 a AR Quantity 0 1 2 3 4 5 MR 6 7 .00 TOTAL PROFIT b 4.50 x 3 = £4.


LONG-RUN EQUILIBRIUM Profit of a Monopolist .

A monopolist there for Faces a downward sloping AR curve with MR curve.  The Monopoly can take the market demand curve as its own demand.  Competition increases social welfare.CONCLUSION  Pure monopoly is rare but many firms have monopoly power. but monopoly is always bad! .

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