This document provides an overview of monopoly, including definitions, types, and the costs and benefits. It defines monopoly as single firm control over supply according to Professor Chamberlain, and as a firm being independent of other firms' prices according to Professor Triffin. True monopolies generally exist in government-controlled markets, while private firms may have considerable market share. A monopoly faces an inelastic demand curve and will set price at a higher level and quantity at a lower level than competitive markets. This results in losses of consumer surplus but gains in producer surplus for the monopolist. Types of monopoly discussed include pure, actual/effective, and natural. Potential advantages include encouraging innovation, though disadvantages include exploitation of consumers and potential inefficiency.

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PRESENTED BYPOOJA NIGAM
SAIMA ABBAS
SANA REHMAN
SHEIKH ARIBA ZAFAR
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2. Monopoly
• Origins of monopoly:
– Through growth of the firm
– Through amalgamation, merger
or takeover
– Through acquiring patent or license
– Through legal means – Royal charter,
nationalisation, wholly owned plc

6. DEFINITION OF
MONOPOLY
1) According to PROF. CHAMBERLAIN,” Monopoly
refers to the control over supply.”
PROF. CHAMBERLAIN
PROF.ROBERT TRIFFIN
2) According to PROF.ROBERT
TRIFFIN ,”Monopoly is a market
situation in which the firm is
independent of price changes in the
product of each and every other firm.”

10. EXISTENCE OF MONOPOLY
•True monopolies generally existing government
controlled markets.
. EXAMPLE- INDIAN RAILWAY
•Monopoly in private businessisrare.
•Private firms who have considerable marketshare. .
EXAMPLE- MICROSOFT,INTEL,GOOGLE.

12. Monopoly power

18. Monopoly
Costs / Revenue
MC
£7.00
AC
Monopoly
Profit
AR (D) curve for a
monopolist likely to be
relatively price
inelastic. Output
assumed to be at profit
maximising output
(note caution here – not
all monopolists may
aim
for profit
maximisation!)
This is both the short
run and long run
equilibrium position for
a monopoly
£3.00
Given the barriers to
entry, the monopolist
will be able to exploit
abnormal profits in the
long run as entry to the
market is restricted.
MR
Q1
AR
Output / Sales

19. The higher price and lower
output means that consumer
surplus is reduced, indicated
by the grey shaded area.
Monopoly
Welfare
implications of
monopolies
Costs / Revenue
MC
£7
AC
Loss of consumer
surplus
A look back at competitive for
The price in a the diagram
The monopoly price
perfect competition will reveal
market would be £3 with
that in equilibrium,per will be
would be at Q1.priceunit
output levels £7
equal to the MC of production.
with output levels
We can lookQ2.
lower at therefore at a
comparison of the differences
between face of it,
On theprice and output in a
competitive situation compared
consumers face
to a monopoly.
£3
AR
MR
Q2
Q1
higher prices and
less choice in
monopoly conditions
compared to more
competitive
environments.
Output / Sales

20. Monopoly
Welfare
implications of
monopolies
Costs / Revenue
MC
£7
AC
Gain in producer
surplus
£3
The monopolist
will benefit from
additional
producer
surplus equal to
the grey shaded
rectangle.
AR
MR
Q2
The monopolist will be
affected by a loss of producer
surplus shown by the grey
triangle but……..
Q1
Output / Sales

21. TYPES OF MONOPOLY
• Monopoly:
• Pure monopoly – industry is the firm!
• Actual monopoly – where firm has >25%
market share.
• Natural Monopoly – high fixed costs – gas,
electricity, water, telecommunications,
rail.
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ON
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22. ADVANTAGES OF MONOPOLY
Advantages:
1) May be appropriate if natural monopoly
Encourages R&D.
2) Encourages innovation.
3) Development of some products not likely without some
guarantee of monopoly in production.
4) Economies of scale can be gained – consumer may benefit.

23. DISADVANTAGES OF MONOPOLY
• Disadvantages:
– Exploitation of consumer – higher prices.
– Potential for supply to be limited - less choice.
– Potential for inefficiency –
X-inefficiency – complacency
controls on costs.
over

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