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Monopoly
Monopoly
Monopoly
Monopoly
Monopoly
Monopoly
Monopoly
Monopoly
Monopoly
Monopoly
Monopoly
Monopoly
Monopoly
Monopoly
Monopoly
Monopoly
Monopoly
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Monopoly

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  • 1. Monopoly is a form of market structure in which a single seller or firm has control over the entire market supply. Meaning: Monopoly is a market situation in which there is only one seller of a product with barriers to entry of others. The product has no close substitutes.
  • 2.  Here, no other firms produce a similar product.  Monopolistic can sell his commodity at any price he likes.  He has control over price.  The sole seller in the market is called “monopolist”
  • 3. Definition:  Acc to Kautsoyiannis – “Monopoly is a market situation in which there is a single seller. There are no close substitutes of the commodity it produces, there are barriers to entry.”  Ferguson – “A pure monopoly exists when there is only one producer in the market. There are no direct competitions.”
  • 4. Single producer and large number of buyers. • No close substitutes. • Barriers to entry. • Full control over price. • Price discrimination. • No competition. • No distinction between firm and industry. •
  • 5.     Legal Restrictions or barriers to entry of new firms Sole control over the supply of scarce and key raw materials Efficiency in production Economies of scale
  • 6. Natural monopoly It arises because of natural factors like soil, rainfall etc  Social monopoly It is in the hands of the government. In certain fields, competition is not desirable. 
  • 7.   Legal monopoly it is created by the law of the country. Voluntary monopoly It arises due to voluntary factors.
  • 8.  Output and price determination under monopoly in short-run and long-run
  • 9. The monopolist maximises his short run profit, when he produces that level of output at which. • • The short run marginal cost is equal to the short run marginal revenue (SMC = SMR) The marginal cost is rising
  • 10.  A monopoly firm equates its MC with MR and determine equilibrium output.  Price is determined in view of demand or average revenue curve.  Equilibrium point B is determined by the intersection of the SMR curve and the SMC curve. SMC = SMR  OQ equilibrium output is produced by the firm. The firm can sell this output only at price OP.  In this illustration profit is PABC.  Once the output is decided, the price is determined correspondingly in relation to the given demand curve.
  • 11.  Though pure monopolist has full control over the market supply, he can not determine price independently in market.  when equilibrium output is decided at the point of equality between MR and MC the price is automatically determined in relation to the demand of product.  Equilibrium output is determined at falling path of AC curve. Which means the monopolist restrict output before producing it at the optimum level in order to maximise his profit.
  • 12. Long run equilibrium, determined by the equality of long run marginal cost (LMC) and the marginal revenue (LMR), so that profit is maximised.  If the firm is earning some profit in short run it has to determined the most profitable long run plant size and corresponding price and output. 
  • 13. Curve D is the demand curve/ average revenue curve.  LAC and LMC are the long run average and marginal cost curves.  LAC is envelope to various SAC curves.  LMC and LMR intersect with the point E where is having optimum level of output. 
  • 14. THANK YOU

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