MONOPOLY

Presented To: Mam saroj

Presented By: Shajabee Deepa Sangeeta chouhan Ruchika Deepika

Monopoly is a market situation where there is a single firm selling the commodity and there is no close substitute of the commodity sold by the monopolist
Monopoly is a form of the market in which there is a single seller or producer of a commodity . There are no close substitutes of the monopoly product and there Legal ,Technical or Natural barriers to the entry of new firms in the monopoly market.

The fundamental cause of monopoly is barriers to entry.

A monopoly is the sole supplier of a product with no close substitutes The most important characteristic of a monopolized market is barriers to entry new firms cannot profitably enter the market

Barriers to entry are restrictions on the entry of new firms into an industry
Economics of Scale Product Differentiation Absolute Cost Advantages

Cont

Capital Requirement
Control Over Inputs Legal Restrictions Strategic Barriers

 1)Grant

Of Patent Rights 2)Licensing By Government 3).Forming By Cartel 4).Miscellaneous

1).Single Seller Of The Commodity 2).Absence Of Close Substitute Of Product 3)Difficult Entry Of New Firm 4)Negatively Sloped Demand Curve 5).Price Marker With Constraint 6)Price Discrimination

A).Merits Of Monopoly

B).Demerits

(i)High Level of skills (ii) Patent rights (iii) Public monopoly (iv) Over production (v)Advertisement

(i)Less Output (ii)High Price

Output PRICE =(Unit sold) (p) (Q)

Total Average Marginal Revenue(RS) Revenue(RS) Revenue (TR= PxQ) (AR=TR/Q) MR=DTR/D Q 20 36 48 56 60 60 56 48 20 18 16 14 12 10 8 6 16 12 8 4 0 -4 -8

1 2 3 4 5 6 7 8

20 18 16 14 12 10 8 6

(1)Equilibrium in monopoly
(a)Total revenue and Total cost approach (b)Marginal revenue and Marginal cost approach

(2)Price determination in monopoly (a)In short period

(b)In Long period

Total Revenue And Total Cost Approach

Marginal Revenue And Marginal Cost Approach

Y R e v e n u e a n d c o s t

MC F P PROFIT R E G AR MR AC

(Total profit)= (AR-AC)x(quantity produced)

o Quantity of production

TR

MR

TC

MC

10 11 12 13 14

30 29 28 26 24

300 319 336 338 336 19 17 2 -2

250 268 285 300 313

18 17 15 13

(MONO POLY PROFIT) 50 51 51 38 23

Monopoly Price During Short Run

Y

P R I C E
R E V E N U E

B PROFIT C SMC=MR

P SMC SAC A E AR MR

Supernormal Profit (Ap x CA=CAPB)

AR>SAC
X

M OUTPUT

NORMAL PROFIT
SMC T SAC

AR

MR X 0 Q

AR=SAC

MINIMUM LOSS
S T SMC=MR 0 E Q AR MR X SMC SAC

P R

AR<SAC

Y P R I C E

LONG RUN
LMC LAC P

C O S T

PROFIT
L E AR

MR
0 Q X

Fear of possible competition Fear of substitute commodities Public Bycott Elasticity Of Demand Of Concerned commodity Laws of Returns Fear of nationalization Enlightened and Progressive Monopolist

Control On Price And Production Restriction On Malpractices Publicity Of Evils Of Monopoly Encouragement To Consumers Associations Public Ownership And Management Prohibition On Emergence Of Monopoly And Break Of Monopoly Encouragement to Co-operative Production and Distribution

Perfect Competition

Monopoly

A very large number of seller of product Product are Homogeneous Free entry and exit of a firms Price is uniform in the market. Price=MC

A single seller(firm) of product Product are no close substitute Very difficult entry of a new firm Due to Price discrimination .price is not uniform. Price>MC

MONOPOLY

MONOPOLISTICCOMPETITION

There is single firm Product has no close substitute Product is homogeneous Entry of new firm very difficult Selling costs are almost null.

There are many firms Product has many close substitutes Product are differentiated Entry of new firm in the market is free. Heavy selling costs are incurred

DEMAND CURVE FOR A MONOPOLY FIRM

Y Dm : DEMAND CURVE FOR A MONOPLOY FIRM

P R I C E

P P1

DM 0 Q QUANTITY Q1 X