This document defines monopoly and discusses its key characteristics. A monopoly is a market structure where there is a single seller of a product without close substitutes. For a monopoly to exist, there must be significant barriers to entry that prevent competition. A monopoly faces a downward-sloping demand curve and is able to set prices, unlike firms in competitive markets which are price takers. While monopolies may lead to higher profits for firms, they also result in inefficient resource allocation and limited options for consumers.

1. MONOPOLY
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2. Introduction
MONO = means “One”
+
POLY = means “ Sell”
One Seller/ One Producer
• Monopoly is the polar
opposite of perfect
competition.
• Monopoly is a market
structure in which a single
firm makes up the entire
market.
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3. Definition Of Monopoly
• According to PROF. CHAMBERLAIN,” Monopoly refers to
the control over supply.”
PROF. CHAMBERLAIN
• 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.”
PROF.ROBERT TRIFFIN 3

4. Monopoly
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5. Why Monopolies Arise?
• The fundamental cause of monopoly is the existence of
barriers to entry.
• Monopolies exist because of barriers to entry into a
market that prevent competition-
• Legal barriers
• Sociological barriers
• Natural barriers
• Barriers to entry have three sources-
• Ownership of a key resource.
• The government gives a firm the exclusive right to produce some good.
• Costs of production make one producer more efficient than a large number
of producers.
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6. Single seller
Characteristics
of monopoly
No close
substitutes
Barriers to
entry
Non- price
competition
Downward
sloping
demand
curve
Price maker
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7. Types of Monopolies
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Perfect Monopoly
Imperfect Monopoly
Private Monopoly
Public Monopoly
Simple Monopoly
Discriminating Monopoly
Legal Monopoly
Natural Monopoly
Technological Monopoly
Joint Monopoly

8. Demerits of monopoly
• Consumer options are limited.
• Profits do not signal firms to enter the industry. (They can’t get in
because of the barriers to entry.)
• There is allocate inefficiency. ( P > MC ) The monopolist does not
produce all units that consumers value more than it costs to make
them.
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9. Monopoly Market Demand Curve
Price
Because the monopoly firm is
the only seller of a good, the
market demand curve for the
good is the same as the
demand curve for the firm’s
product.
Quantity
Demand
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10. Perfect Competition vs. Monopoly
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11. Governments Role in Monopoly
• Prevent Excess Price
• Regulation of quality of service
• Merger Policy
• Breaking up a monopoly
• Investigation of Abuse of Monopoly Power
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12. Price Discrimination
• Price discrimination is the ability to charge different prices to
different individuals or groups of individuals.
• A price-discriminating monopolist can increase both output
and profit.
• It can charge customers with more inelastic demands a higher
price.
• It can charge customers with more elastic demands a lower
price.
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13. The Early Bird Gets a Lower Price
• Early Bird Specials—Restaurants
charge special, lower prices for
early diners.
• Matinees—Theaters charge less
for earlier shows.
• Air Fares—Airlines charge less
for flyers willing to fly “off
peak,” i.e. early morning and
late night.
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14. Case Study
• TATA NANO
• Monopoly in the lower economic segment
• TATA, the only seller
• No close substitutes for Nano in the market
• Barriers to entry in the market(capital requirement,
technology, etc.)
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15. Summary
• A monopoly is a firm that is the sole seller in its market.
• It faces a downward-sloping demand curve for its product.
• A monopoly’s marginal revenue is always below the price of
its good.
• Like a competitive firm, a monopoly maximizes profit by
producing the quantity at which marginal cost and marginal
revenue are equal.
• Unlike a competitive firm, its price exceeds its marginal
revenue, so its price exceeds marginal cost.
• A monopolist’s profit-maximizing level of output is below the
level that maximizes the sum of consumer and producer
surplus.
• Monopolists can raise their profits by charging different prices
to different buyers based on their willingness to pay. 15

16. Thank You
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