This document is about imperfect competition and monopoly. It defines imperfect competition as situations where individual sellers can influence the price of their output, such as in oligopolies and monopolistic competition. Monopoly is described as a market with a single seller who can set price without competition. The document includes a graphical depiction of demand curves under perfect versus imperfect competition. It notes there are many varieties of imperfect competitors in an economy, from fast-changing tech industries to more stable funeral services. Finally, it outlines that monopolies have single production of a unique product and can earn economic profits by setting price without rival firms.

1. N A M E : Z U H A I R Z A I D I
C O U R S E : M I C R O E C O N O M I C S
R E G N O : S P 1 5 – E X 0 0 1 2
T O P I C : I M P E R F E C T C O M P E T I T I O N A N D M O N O P O L Y
T E A C H E R : S Y E D A R S H A D H U S S A I N
IMPERFECT COMPETITION AND
MONOPOLY

2. IMPERFECT COMPETITION
The Best of all monopoly profits is a quiet life
J.R. HICKS
Definition of Imperfect Competition
 If a firm can affect the market price of its output, the firm is classified as an
imperfect competition.
 Imperfect competition prevails in an industry whenever individual sellers can affect
the price of their output. The major kinds of imperfect competitions are monopoly,
monopoly, oligopoly and monopolistic competition.
 Imperfect competitions does not imply that a firm has absolute control over the price of
its product. Take the cola market, where Coca – cola and Pepsi together have the major
share of the market, and imperfect competition clearly prevails. If the average price of
other producers’ sodas in the market is 75 cents, Pepsi may be able to set the price of a
can at 70 or 80 cents and still remain a viable firm. The firm could hardly set the price of
$40 or 5 cents a can because at those prices it would go out of business.

3. GRAPHICAL DEPICTION
 Figure 9-1 (a) reminds us that a perfect competitor faces a horizontal demand curve,
indicating that it can sell all it wants at the going market price. An imperfect competitor,
in contrast, faces a downward – sloping demand curve. Figure
(a) Firm Demand under perfect competition | Firm Demand under imperfect competition
 (a) The perfectly competitive firm can sell all it wants along its horizontal dd curve
without depressing the market price. (b) But the imperfect competitor will find that
Price
Quantity

4. VARITIES OF IMPERFECT COMPETITORS
 its demand curve slopes downward as higher price drives sales down. And unless it is a
sheltered monopolist, a cut in its rivals’ prices will appreciably shift its own demand
curve leftward to dd.
 A modern n industrial economy like the United States is a jungle populated with many
species of imperfect competition. The dynamics of the personal computer industry,
driven by rapid improvements in technology, are different from the patterns of
competition in the not so lively funeral industry.
MONOPOLY
 Only seller in the market
 Entry of other firms is restricted by patents, etc
 They have absolute power over setting market price
 They produce a unique product
 They can make economic profits in the long run because they can set price without
competition.

5. MONOPOLY FORM
Total revenue is equal
to the area 0PECQE,
which forms the blue
box to the left…
produces where MC=MR
(point A), but then reads
up to the demand curve
(point C) when setting
price PE.

6. END OF IMPERFECT COMPETITION AND MONOPOLY