C

OMPARE THE FEATURES OF PERFECT THE FEATURES OF PERFECT

COMPETITION AND MONOPOLY
MARKET STRUCTURES
Group : 01
LOGO
05.03.2014
Economics
Group Presentation
HND: Qs 03
BCAS- Jaffna
1GROUP MEMBERS
KADOTGAJAN
BAKEERATHAN
SUMAN
VINOJ
SAKEESAN
2CONTENTS
1.
Introduction.
2.
Characteristics Of Perfect Competition
Market.
3.
Characteristics Of Monopoly Market.
4.
Compare And Contrast.
5.
Conclusion.
34Introduction

Definition of Perfect Competitive market.

Definition of Monopoly market.

Characteristics of Perfect Competitive
market.

Large member of buyers and sellers.

Free entry and exit.

Buyers and sellers are price takers.

Can earn ordinary profit in long term.
5
Characteristics of Monopoly market.

Single seller

No close substitutes

Barriers
to
entry

Can earn Abnormal Profits

Compare and Contrast.

Conclusion.
67Perfect Competition Market

Perfect competition is a market structure
where there are large number of buyers
and
sellers.
8Characteristics of Perfect Competition
Market
Large member of buyers and sellers.
Free entry and exit.
Perfect knowledge.
Identical product.
No government intervention.
Buyers and sellers are price takers.
Can earn ordinary Profit in Long Term
9Profit-Maximizing Level of Output

The goal of the firm is profit maximization.

Profit = Total revenue - Total cost.

A
firms
Equilibrium Equilibrium
point
is
MC=MR
10Profit-Maximizing
11Shutdown

A short-run decision to not to produce anything
because of the market circumstances

If shutdown in short-run, must still pay fixed cost
Exit

A long-run decision to leave the market

If exit in long-run, zero costs
Sunk cost

The expenditure that has already been cannot be
recovered
12Zero-Profit condition

The situation where the firms earn zero profit

Zero economic profit occurs when P=ATC
1314What is Monopoly?

Monopoly is a market structure where there is
only a single seller with complete control of the
whole industry.

The main cause of monopoly is the entry barriers

Factors
of
Monopoly.
1. Resource
2. Government
3. Natural factors
15Characteristics of Monopoly Market
Single seller
Lack of Perfect knowledge
No close substitutes
16
Barriers to entry
Price discrimination
Price maker
Can earn Abnormal Profits Monopoly
17Deadweight loss due to Monopoly
18Monopoly's Revenue
Quantity Price Total
Revenue
Average
Revenue
Marginal
Revenue
0 11 0 ------- -----
1 10 10 10 10
2 9 18 9 8
3 8 24 8 6
4 7 28 7 4
5 6 30 6 2
6 5 30 5 0
7 4 28 4 -2
8 3 24 3 -4

Summary
1920Comparison
Comparison
Similarities
Differences
21Similarities
1.
Towards Maximum Profit
2.
Equilibrium Condition: MC = MR .
22
Perfect Competition Market Monopoly MarketSimilarities cont.
3.
Determination of Price .
23
Perfect Competition Market Monopoly MarketSimilarities cont.
4.
Cost Curves .
24
Perfect Competition Market Monopoly MarketSimilarities cont.
5.
Can earn economic profits in the short run.
25
Perfect Competition Market Monopoly MarketDifferences
Perfect Competition Monopoly
Large numbers of firms and buyers Single firm with le
ss buyers
A single firm cant effect the price A single firm
can effect the price
Producer is Price Taker .. Price maker ..
Consumers Sovereignty (Power)
exists
Producers Sovereignty
No barriers to enter the market Barriers to enter th
e market
26
Perfect Competition Market Monopoly MarketDifferences cont.
Perfect Competition Monopoly
Price Discrimination is not possible
Price Discrimination is possible
Equilibrium Pricing Condition ..
27
Perfect Competition Market Monopoly MarketDifferences cont.
Perfect Competition Monopoly
Close Substitution exists
No Substitutions
MR=AR=P=D
Price > MC.
Demand curves Shape (Ed ) .. Demand curves Shape (Ed < ,
>, = 1)..
28
Perfect Competition Market Monopoly MarketDifferences cont.
Perfect Competition Monopoly
Profit in Short Run Short Run
Normal, Abnormal, Loss
Abnormal profit.
Profit in Long Run Long Run
Normal
Super Abnormal profit.
29Differences cont.
Perfect Competition :
Normal, Abnormal, Loss in
SR
and
Normal Profit in
LR
30Differences cont.
Monopoly :
Abnormal profit & Super Abnormal Profit.
in
SR and LR
3132Conclusion

Several Several Real world examples examples
Perfect Competition:

Agricultural markets

Fish market and vegetable or fruit vendors

Free
software
vendors

Street food vendors
Monopoly

Ceylon Petroleum Cooperation

Sri Lankan Railways

Drugs for Aids patients
33Perfect Competition & Monopoly
in Contemporary scenario

Both markets doesn't exist
Because;

Governments influences

Privatization/ Globalization

Sales
Promoting Promoting
Strategies Strategies i..e.. Ads

So we can conclude conclude that the Perfect Perfect Competition Competition
& Monopoly Monopoly markets markets are conceptual conceptual markets markets in
the Contemporary Contemporary scenario scenario..
34Questions?
35LOGO
36