MANAGERIAL
ECONOMICS
AND

PRESENTED BYPOOJA NIGAM
SAIMA ABBAS
SANA REHMAN
SHEIKH ARIBA ZAFAR
TABASSUM
ZEBA
Monopoly
• Origins of monopoly:
– Through growth of the firm

– Through amalgamation, merger
or takeover
– Through acquiri...
DEFINITION OF
MONOPOLY

1) According to PROF. CHAMBERLAIN,” Monopoly
refers to the control over supply.”
PROF. CHAMBERLAIN...
EXISTENCE OF MONOPOLY
•True monopolies generally existing government
controlled markets.
. EXAMPLE- INDIAN RAILWAY
•Monopo...
Monopoly power
Monopoly
Costs / Revenue

MC
£7.00

AC

Monopoly
Profit

AR (D) curve for a
monopolist likely to be
relatively price
inela...
The higher price and lower
output means that consumer
surplus is reduced, indicated
by the grey shaded area.

Monopoly

We...
Monopoly

Welfare
implications of
monopolies

Costs / Revenue

MC
£7

AC

Gain in producer
surplus
£3

The monopolist
will...
TYPES OF MONOPOLY
• Monopoly:
• Pure monopoly – industry is the firm!
• Actual monopoly – where firm has >25%
market share...
ADVANTAGES OF MONOPOLY

Advantages:
1) May be appropriate if natural monopoly
Encourages R&D.
2) Encourages innovation.
3)...
DISADVANTAGES OF MONOPOLY

• Disadvantages:
– Exploitation of consumer – higher prices.

– Potential for supply to be limi...
Movie ticket

DISCOUNT
COUPON
QUANTITY DISCOUNT
AUTOMOBILE

STEEL

PETROCHEMICAL
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  • Monoploy

    1. 1. MANAGERIAL ECONOMICS AND PRESENTED BYPOOJA NIGAM SAIMA ABBAS SANA REHMAN SHEIKH ARIBA ZAFAR TABASSUM ZEBA
    2. 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
    3. 3. 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.”
    4. 4. 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.
    5. 5. Monopoly power
    6. 6. 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
    7. 7. 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
    8. 8. 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
    9. 9. 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. TELECOMMUNICATI ON RAIL
    10. 10. 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.
    11. 11. 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
    12. 12. Movie ticket DISCOUNT COUPON QUANTITY DISCOUNT
    13. 13. AUTOMOBILE STEEL PETROCHEMICAL
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