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Monopoly
Introduction:- A monopoly is a firm that is the
sole seller of a product without close substitutes
The key difference between monopoly and perfect
competition:-A monopoly firm has market power, the
ability to influence the market price of the product it
sells. A competitive firm has no market power. It’s a
price taker.
Features of Monopoly
• Single seller
• No close substitute
• Profit maximiser
• Price maker
• Firms and industry are same
• Barriers to entry of new firms
• Price discrimination
Reason why Monopoly exists?
• Control over key resources
• Economies of scale
• Government action :-
1. Govt Monopoly :- An agency under the direct
authority of govt itself hold the monopoly
2. Govt granted Monopoly:– govt gives ả private
firm right to be a sole provider of a particular
product
Price and output determination under
monopoly
• Equilibrium of firm:- A situation or an output level where a firm gets
maximum profit
1.MR=MC
2.MC cuts MR from below
Price and output determination in short run:- short run is a condition or time
period where some factors are fixed and some are variable .A producer can’t change the all factors of the production in
short run and that’s why he can’t adjust its supply according to the market demand .
• Super normal profit:- AR > AC
• Normal profit:– AR = AC
• Loss:- AR
PRICE DISCRIMINATION
Price discrimination is a practice of charging ả different price for the same good.
• TYPES OF PRICE DISCRIMINATION
1. First degree price discrimination
2. Second degree price discrimination
3. Third degree price discrimination
4. Personal discrimination
5. Trade discrimination
6. Place discrimination
CONDITION OF PRICE DISCRIMINATION
• Monopoly position
• Separation of market
• Difference in elasticity
• Ignorance of consumer
MONOPOLY.pdf

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MONOPOLY.pdf

  • 1. Monopoly Introduction:- A monopoly is a firm that is the sole seller of a product without close substitutes The key difference between monopoly and perfect competition:-A monopoly firm has market power, the ability to influence the market price of the product it sells. A competitive firm has no market power. It’s a price taker.
  • 2. Features of Monopoly • Single seller • No close substitute • Profit maximiser • Price maker • Firms and industry are same • Barriers to entry of new firms • Price discrimination
  • 3. Reason why Monopoly exists? • Control over key resources • Economies of scale • Government action :- 1. Govt Monopoly :- An agency under the direct authority of govt itself hold the monopoly 2. Govt granted Monopoly:– govt gives ả private firm right to be a sole provider of a particular product
  • 4. Price and output determination under monopoly • Equilibrium of firm:- A situation or an output level where a firm gets maximum profit 1.MR=MC 2.MC cuts MR from below
  • 5. Price and output determination in short run:- short run is a condition or time period where some factors are fixed and some are variable .A producer can’t change the all factors of the production in short run and that’s why he can’t adjust its supply according to the market demand . • Super normal profit:- AR > AC • Normal profit:– AR = AC • Loss:- AR
  • 6. PRICE DISCRIMINATION Price discrimination is a practice of charging ả different price for the same good. • TYPES OF PRICE DISCRIMINATION 1. First degree price discrimination 2. Second degree price discrimination 3. Third degree price discrimination 4. Personal discrimination 5. Trade discrimination 6. Place discrimination
  • 7. CONDITION OF PRICE DISCRIMINATION • Monopoly position • Separation of market • Difference in elasticity • Ignorance of consumer