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Imperfect<br />Competition<br /><ul><li>MONOPOLY</li></ul>Rajesh Kumar<br />PGP-I<br />MBA-ABM<br />CABM,GBPUA&T<br />12/9...
Imperfect Competition<br />An imperfectly competitive industry is an industry in which single firms have some control over...
The characteristics of Monopoly are<br /><ul><li>Single Seller
No Close Substitutes
Price Maker
Blocked Entry
Non-price Competition
Availability of information(Imperfect)</li></ul>12/9/2009<br />3<br />continued...<br />
MONOPOLY<br />Monopolies exist because of barriers to entry into a market that prevent competition.<br />  ex:-railways, e...
Economies of Scale<br />In some industries, the larger the scale of production, the lower the costs of production.<br />En...
Government<br />Governments often provide barriers, creating monopolies.<br />As incentives to innovation, governments oft...
Types of Monopolies<br />Natural monopoly: A monopoly that arises from economies of scale. The economies of scale arise fr...
Monopoly: Equilibrium<br />P<br />y = Q<br />Demand<br />MR<br />12/9/2009<br />8<br />continued...<br />
Monopoly: Equilibrium<br />MC<br />P<br />y<br />Demand<br />MR<br />12/9/2009<br />9<br />continued...<br />
Monopoly: Equilibrium<br />MC<br />P<br />AC<br />y<br />Demand<br />MR<br />12/9/2009<br />10<br />continued...<br />
Monopoly: Equilibrium<br />MC<br />Output Decision<br />MC = MR<br />P<br />AC<br />ym<br />y<br />Demand<br />MR<br />12/...
Monopoly: Equilibrium<br />MC<br />Pm = the price<br />P<br />AC<br />Pm<br />ym<br />y<br />Demand<br />MR<br />12/9/2009...
Monopoly: Equilibrium<br />Firm = Market<br />Short run equilibrium diagram = long run equilibrium diagram (apart from sha...
Monopoly: Equilibrium<br />MC<br />The shaded area is the excess profit<br />P<br />AC<br />Pm<br />ym<br />y<br />Demand<...
EQUILIBRIUM PRICE AND OUTPUT UNDER MONOPOLY IN SHORT RUN<br />PROFIT-MAXIMIZING CASE:<br />A firm in the short run earns m...
EQUILIBRIUM PRICE AND OUTPUT UNDER MONOPOLY IN SHORT RUN<br /><ul><li>PROFIT-MAXIMIZING CASE:</li></ul>MC<br />Revenue/<br...
EQUILIBRIUM PRICE AND OUTPUT UNDER MONOPOLY IN SHORT RUN<br />NORMAL PROFIT CASE:<br />A firm in the short run earns norma...
EQUILIBRIUM PRICE AND OUTPUT UNDER MONOPOLY IN SHORT RUN<br /><ul><li> NORMALPROFIT CASE:</li></ul>MC<br />Revenue/<br />C...
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Monopoly Market Structure

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what is monopoly, its characteristics, probable cause & equilibrium price and output in short n long run.
u can mail me ur views on rajeshkr.1128@gmail.com

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Transcript of "Monopoly Market Structure"

  1. 1. Imperfect<br />Competition<br /><ul><li>MONOPOLY</li></ul>Rajesh Kumar<br />PGP-I<br />MBA-ABM<br />CABM,GBPUA&T<br />12/9/2009<br />1<br />continued...<br />
  2. 2. Imperfect Competition<br />An imperfectly competitive industry is an industry in which single firms have some control over the price of their output.<br />Some examples are Monopoly, Oligopoly and Monopolistic competition.<br />Monopoly:- A market structure in which only one producer or seller exists for a product that has no close substitutes<br />12/9/2009<br />2<br />continued...<br />
  3. 3. The characteristics of Monopoly are<br /><ul><li>Single Seller
  4. 4. No Close Substitutes
  5. 5. Price Maker
  6. 6. Blocked Entry
  7. 7. Non-price Competition
  8. 8. Availability of information(Imperfect)</li></ul>12/9/2009<br />3<br />continued...<br />
  9. 9. MONOPOLY<br />Monopolies exist because of barriers to entry into a market that prevent competition.<br /> ex:-railways, electricity.<br />There are three general classes of barriers to entry(CAUSE):<br />Natural barriers, the most common being economies of scale<br />Actions by firms to keep other firms out<br />Government (legal) barriers<br />12/9/2009<br />4<br />continued...<br />
  10. 10. Economies of Scale<br />In some industries, the larger the scale of production, the lower the costs of production.<br />Entrants are not usually able to enter the market assured of or capable of a very large volume of production and sales.<br />This gives incumbent firms a significant advantage.<br />Examples are electric power companies and other similar utility providers.<br />12/9/2009<br />5<br />continued...<br />
  11. 11. Government<br />Governments often provide barriers, creating monopolies.<br />As incentives to innovation, governments often grant patents, providing firms with legal monopolies on their products or the use of their inventions or discoveries for a period of 17 years. <br />12/9/2009<br />6<br />continued...<br />
  12. 12. Types of Monopolies<br />Natural monopoly: A monopoly that arises from economies of scale. The economies of scale arise from natural supply and demand conditions, and not from government actions.<br />Local monopoly: a monopoly that exists in a limited geographic area.<br />Bilateral Monopoly: only one buyer, very rare <br /> ex; expensive defence goods-govt.is single buyer.<br />Regulated monopoly: a monopoly firm whose behavior is overseen by a government entity.<br />Monopolization: an attempt by a firm to dominate a market or become a monopoly.<br />12/9/2009<br />7<br />continued...<br />
  13. 13. Monopoly: Equilibrium<br />P<br />y = Q<br />Demand<br />MR<br />12/9/2009<br />8<br />continued...<br />
  14. 14. Monopoly: Equilibrium<br />MC<br />P<br />y<br />Demand<br />MR<br />12/9/2009<br />9<br />continued...<br />
  15. 15. Monopoly: Equilibrium<br />MC<br />P<br />AC<br />y<br />Demand<br />MR<br />12/9/2009<br />10<br />continued...<br />
  16. 16. Monopoly: Equilibrium<br />MC<br />Output Decision<br />MC = MR<br />P<br />AC<br />ym<br />y<br />Demand<br />MR<br />12/9/2009<br />11<br />continued...<br />
  17. 17. Monopoly: Equilibrium<br />MC<br />Pm = the price<br />P<br />AC<br />Pm<br />ym<br />y<br />Demand<br />MR<br />12/9/2009<br />12<br />continued...<br />
  18. 18. Monopoly: Equilibrium<br />Firm = Market<br />Short run equilibrium diagram = long run equilibrium diagram (apart from shape of cost curves)<br />At qm: pm &gt; AC therefore you have excess (abnormal, supernormal) profits<br />Short run losses are also possible<br />12/9/2009<br />13<br />continued...<br />
  19. 19. Monopoly: Equilibrium<br />MC<br />The shaded area is the excess profit<br />P<br />AC<br />Pm<br />ym<br />y<br />Demand<br />MR<br />12/9/2009<br />14<br />continued...<br />
  20. 20. EQUILIBRIUM PRICE AND OUTPUT UNDER MONOPOLY IN SHORT RUN<br />PROFIT-MAXIMIZING CASE:<br />A firm in the short run earns maximum profit when it meets the following conditions;<br />MR = MC and MC curve cuts MR from below<br />Average Revenue is greater than Average Total Cost.<br />12/9/2009<br />15<br />continued...<br />
  21. 21. EQUILIBRIUM PRICE AND OUTPUT UNDER MONOPOLY IN SHORT RUN<br /><ul><li>PROFIT-MAXIMIZING CASE:</li></ul>MC<br />Revenue/<br />Cost<br />ATC<br />P<br />Profit<br />AVC<br />E<br />AR<br />MR<br />0<br />Output<br />12/9/2009<br />16<br />continued...<br />
  22. 22. EQUILIBRIUM PRICE AND OUTPUT UNDER MONOPOLY IN SHORT RUN<br />NORMAL PROFIT CASE:<br />A firm in the short run earns normal profit when it meets the following conditions;<br />MR = MC and MC curve cuts MR from below<br />Average Revenue is equal to Average Total Cost.<br />12/9/2009<br />17<br />continued...<br />
  23. 23. EQUILIBRIUM PRICE AND OUTPUT UNDER MONOPOLY IN SHORT RUN<br /><ul><li> NORMALPROFIT CASE:</li></ul>MC<br />Revenue/<br />Cost<br />ATC<br />P<br />AVC<br />E<br />AR<br />MR<br />0<br />Output<br />12/9/2009<br />18<br />continued...<br />
  24. 24. EQUILIBRIUM PRICE AND OUTPUT UNDER MONOPOLY IN SHORT RUN<br />LOSS-MINIMIZING CASE:<br />A firm in the short run minimize loss in following way;<br />MR = MC and MC curve cuts MR from below<br />Average Revenue is less than Average Total Cost but greater than AVC.<br />12/9/2009<br />19<br />continued...<br />
  25. 25. EQUILIBRIUM PRICE AND OUTPUT UNDER MONOPOLY IN SHORT RUN<br /><ul><li> LOSS-MINIMIZING CASE:</li></ul>MC<br />Revenue/<br />Cost<br />ATC<br />Loss<br />P<br />AVC<br />E<br />AR<br />MR<br />0<br />Output<br />12/9/2009<br />20<br />continued...<br />
  26. 26. EQUILIBRIUM PRICE AND OUTPUT UNDER MONOPOLY IN LONG RUN<br />A monopoly firm will be in equilibrium in long run and will earn Economic profit if;<br />MC = MR and MC cuts MR curve from below<br />AR is greater than Average Cost and <br />There is no threat of new entry into the market<br />If there is threat of new entry so monopolist will reduce prices and will earn only normal profit.<br />12/9/2009<br />21<br />continued...<br />
  27. 27. EQUILIBRIUM PRICE AND OUTPUT UNDER MONOPOLY IN LONG RUN<br />MC<br />Revenue/<br />Cost<br />ATC<br />P<br />Profit<br />AVC<br />E<br />AR<br />MR<br />0<br />Output<br />12/9/2009<br />22<br />continued...<br />
  28. 28. thank-you…….<br /> have a nice day.<br />12/9/2009<br />23<br />continued...<br />
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