A market structure characterized by a single seller, selling a unique product in the market.

1. َّ‫الر‬ ِ‫ن‬ ٰ‫م‬ْ‫ح‬َّ‫الر‬ ِ‫هللا‬ ِ‫م‬ْ‫س‬ِ‫ب‬ِ‫ْم‬‫ي‬ ِ‫ح‬

3. MONOPOLY
“Monopoly exists when a specific individual or an
enterprise is the only supplier of a particular kind of
product or services.”
While a competitive firm is a price taker, a
monopoly firm is a price maker.
A firm is considered a monopoly if …..
 It is the sole seller of its products
 Products does not have close substitutes
Example: Railway, Electricity …

4. WHY MONOPOLY ARISE?
There are three general classes of
barriers to entry:
 Ownership of a key resource
De Beers is an example
 The government gives a single
firm the exclusive right to
produce some good
 Cost of product make a single
producer more efficient than a
large number of producer
Natural monopolies

5. ECONOMIES OF SCALE
 In some industries, When more units of a good or a service can
be produced on a larger scale, yet with (on average) fewer
input costs, economies of scale (ES) are said to be achieved.
 Alternatively, this means that as a company grows and
production units increase, a company will have a better chance
to decrease its costs.
 This gives incumbent firms a significant advantage .
 Examples are electric power companies and others similar
utility providers

6. TYPES OF MONOPOLY
There are four types of monopoly:
•
Types
Natural
monopoly
Technological
monopoly
Geographical
Monopoly
Government
monopoly

7.  A monopoly marginal revenue is always less than the price of its goods.
 The demand curve is downward sloping.
 When a monopoly drops the price to sell one more unit the
revenue received from previously sold units also decrease
MONOPOLY AND MARGINAL REVENUE
A Monopoly Revenue
Total Revenue
P×Q=TR
Average Revenue
TR/Q=AR=P
Marginal revenue
∆TR/∆Q=MR

8. A MONOPOLY’S TOTAL, AVERAGE,
AND MARGINAL REVENUE

9.  Profit equals total revenue minus total costs
• PROFIT = TR-T
• PROFIT = (TR/Q-TC/Q) × Q
• PROFIT = (P-ATC) × Q
MONOPOLY PROFIT
Monopolist’s profit
The monopolist will receive economic profits as long as price is greater than average total
cost

10. EQUILIBRIUM PRICE AND OUTPUT
UNDER MONOPOLY IN SHORT RUN
PROFIT CASES
PROFIT MAXIMIZING CASE NORMAL
PROFIT CASE
LOSS
MINIMIZING CASE
A firm in the short run earns
maximum profit when it
meets the following
conditions:
A firm in the short run earns
normal profit when it meets
the following conditions:
A firm in the short run
minimize loss when it meets
the following conditions:
1. MR=MC & MC curve
cuts MR from below
2. Average revenue is
greater than average
total cost.
1. MR=MC & MC curve
cuts MR from below
2. Average revenue is
equal to average total
cost.
1. MR=MC & MC curve
cuts MR from below
2. Average revenue is less
than average total cost.

11. CONTINUE…

12. EQUILIBRIUM PRICE AND OUTPUT
UNDER MONOPOLY IN LONG RUN
PROFIT CASES
Equilibrium Case
A monopoly firm will be in equilibrium in long
run and will earn Economic profit if it satisfy
these conditions:
1. MC=MR & MC curve cuts MR from below
2. AR is greater than Average Cost and
3. There is no threat of new entry into the
market

13. THANK
YOU