MARKET STRUCTURE

1. MonopolyMonopoly
Short RunShort Run

2. Monopoly Short RunMonopoly Short Run
Definition
A market structure where there is
only a single vendor that sells a
homogeneous product that has no
successor and there is almost
restrictions for inclusion in the
industry

3. Monopoly Short RunMonopoly Short Run
Characteristic
1. One
industry
5. No
advertisement
2. No substitute
goods
3. No freedom to
entry and exit
4. Price
determinants

4. Monopoly Short RunMonopoly Short Run
Characteristic of monopoly
1.Industry consists of a monopoly firm.
There is only one vendor who sells the
goods in respect of which it can not be
obtained elsewhere. Buyers have no choice
and can only obtain goods or services from
monopoly firms only.

5. Monopoly Short RunMonopoly Short Run
2. Goods which have not produced a
replacement.
Goods produced by the monopoly firm can
not be replaced in proper from other firms,
especially in terms of usefulness. For
example water and electricity do not have
a convenient substitute.

6. Monopoly Short RunMonopoly Short Run
3. There is no freedom in and out in
monopoly industries.
There is no freedom of entry and exit into
the industry monopoly because there are
barriers to entry that nature protection law,
the financial needs of large, high
technology needs and others that allow a
firm has monopoly power.

7. Monopoly Short RunMonopoly Short Run
4. Industry is a monopoly price
determinants.
Because there is no competition from other
firms, the monopoly firm can determine the
desired price level. Curve demand the
monopoly slope down from left to right
shows a monopoly firm can determine the
price level to restrict output.

8. Monopoly Short RunMonopoly Short Run
5. Lack of use advertisement.
As the industry consists of a monopoly firm
and goods produced do not have nearly the
successor, then the use of ads is not
required to develop sales and advertising
are usually made to maintain good
relations with customers

9. DEMAND CURVE, REVENUE CURVE ANDDEMAND CURVE, REVENUE CURVE AND
MARKET PRICESMARKET PRICES
 Because the goods produced by the monopoly firm that is
no successor, then curved monopoly demand is not elastic
and it slope down from left to right.
 Curve requests that are not flexible causes the monopoly
firm can raise price by reducing output and increasing output
but with lower prices.
 A monopoly can choose either to influence the price level
and let the user determine the level of product or product
affect the level by letting users determine the price level.
 Therefore, it can be said monopoly can not influence price
and quantity of product in the same time.

10. DEMAND CURVE, REVENUE CURVE ANDDEMAND CURVE, REVENUE CURVE AND
MARKET PRICESMARKET PRICES
 Total Revenue, Average Revenue and Marginal Revenue
 Example 1;
Output
(unit)
Price
(RM)
Total
Revenue
(TR)
Average
Revenue
(AR)
Marginal
Revenue
(MR)
1 5 5 5 5
2 4 8 4 3
3 3 9 3 1
4 2 8 2 -1
5 1 5 1 -3

11. DEMAND CURVE, REVENUE CURVE ANDDEMAND CURVE, REVENUE CURVE AND
MARKET PRICESMARKET PRICES
Total Revenue/Total Cost
A
9
TR
Output (Q)0 3
Price
L e >
1
e = 13 E
e < 1
MR AR
Output (Q)0 3 6
Figure 1.0 Figure 1.1

12. DEMAND CURVE, REVENUE CURVE ANDDEMAND CURVE, REVENUE CURVE AND
MARKET PRICESMARKET PRICES
 Figure 1.1 shows the number of curved results.
 Total revenue increased to the maximum point at point A
with a total revenue of RM9 product with 3 units.
 After the product units to-3, causing additional product total
revenue decreased.
 Next curved total revenue will be inverted U-shaped.

13. DEMAND CURVE, REVENUE CURVE ANDDEMAND CURVE, REVENUE CURVE AND
MARKET PRICESMARKET PRICES
 Figure 1.2 shows curved marginal revenue (MR) and curved
average revenue (AR).
 Average Revenue Curve (AR) is equal to the curved
demand firm monopoly where it slope down from left to
right.
 But the value of elasticity is different along the curved
request.
 Curve Marginal Revenue (MR) is curved under the average
revenue (AR) because the value of marginal revenue is
always lower than the prices at various levels of product.

14. DEMAND CURVE, REVENUE CURVE ANDDEMAND CURVE, REVENUE CURVE AND
MARKET PRICESMARKET PRICES
Formula :
TR = P X Q
Eg : Total revenue for output 3
= Harga X Kuantiti Keluaran
= RM 3 X 3
. = RM 9
1. Total Revenue
2. Average Revenue
Eg : Average revenue for output 3
=RM9/3
= RM3
AR = TR / Q

15. DEMAND CURVE, REVENUE CURVE ANDDEMAND CURVE, REVENUE CURVE AND
MARKET PRICESMARKET PRICES
MR = ∆TR
∆Q
3. Total Revenue
Formula;
Eg : Marginal reneue for output 3
= RM 9 - RM 8
3 - 2
= RM 1

16. R & R

17. EQUILIBRIUM FIRM IN THE SHORTEQUILIBRIUM FIRM IN THE SHORT
TERM AND LONG-TERMTERM AND LONG-TERM
Short Term
• Equilibrium monopoly achieved when Marginal Cost (MC)
= Marginal Revenue (MR)
• In the short term, the monopoly that is in equilibrium can
be obtained
a) Profit abnormal / super normal
b) a normal profit
c) subnormal profit / loss
d) Close firms

18. EQUILIBRIUM FIRM IN THE SHORTEQUILIBRIUM FIRM IN THE SHORT
TERM AND LONG-TERMTERM AND LONG-TERM
1.SUPER NORMAL PROFIT
PRICE , COST, REVENEU
MC
AC
10 A
8 B
E
O 100
MR AR
OUTPUT (Q)
AVC

19. EQUILIBRIUM FIRM IN THE SHORT TERMEQUILIBRIUM FIRM IN THE SHORT TERM
AND LONG-TERMAND LONG-TERM
Conclusion;
1.Equilibrium Conditions MC = MR
2. AC < AR
3.AVC < AR
4.TR = AR X Q ( 10 X 100 = 1000 )
5.TC = AC X Q ( 8 X 100 = 800 )
PROFIT = TR –TC ( 1000 – 800 = 200)
6. TR > TC = 200 (SUPER NORMAL PROFIT)

20. EQUILIBRIUM FIRM IN THE SHORTEQUILIBRIUM FIRM IN THE SHORT
TERM AND LONG-TERMTERM AND LONG-TERM
2.NORMAL PROFIT
PRICE, COST, REVENUE MC
AC
15 A
E
MR AR
0 100 OUTPUT (Q)
AVC

21. EQUILIBRIUM PERFECT COMPETITION INEQUILIBRIUM PERFECT COMPETITION IN
SHORT RUNSHORT RUN
Conclusion;
1.Equilibrium Conditions MC = MR
2. AC = AR
3.AVC < AR
4.TR = AR X Q ( 15 X 100 = 1500 )
5.TC = AC X Q ( 15 X 100 = 1500 )
PROFIT = TR –TC (1500 – 1500 = 0)
6. TR = TC = 1500 (NORMAL PROFIT / BREAK EVEN
POINT)

22. EQUILIBRIUM FIRM IN THE SHORTEQUILIBRIUM FIRM IN THE SHORT
TERM AND LONG-TERMTERM AND LONG-TERM
3.LOSS
PRICE, COST, REVENUE
AC
A
15
MC
10 B
O 100
MR AR
OUTPUT (Q)
E
AVC

23. EQUILIBRIUM FIRM IN THE SHORT TERMEQUILIBRIUM FIRM IN THE SHORT TERM
AND LONG-TERMAND LONG-TERM
Conclusion;
1.Equilibrium Conditions MC = MR
2. AC > AR
3.AVC < AR
4.TR = AR X Q ( 10 X 100 = 1000 )
5.TC = AC X Q ( 15 X 100 = 1500 )
PROFIT = TR –TC (1000 – 1500 = - 500)
6. TR - TC = -500 (LOSS)

24. EQUILIBRIUM FIRM IN THE SHORTEQUILIBRIUM FIRM IN THE SHORT
TERM AND LONG-TERMTERM AND LONG-TERM
4.CLOSED FIRM
PRICE, COST, REVENEU
MC
AC
AVC
OUTPUT (Q)
MR AR
E
15
30
B
C
0 100

25. EQUILIBRIUM FIRM IN THE SHORT TERMEQUILIBRIUM FIRM IN THE SHORT TERM
AND LONG-TERMAND LONG-TERM
Conclusion;
1.Equilibrium Conditions MC = MR
2. AC > AR
3.AVC > AR
4.TR = AR X Q ( 15 X 100 = 1500 )
5.TC = AC X Q ( 30 X 100 = 3000 )
PROFIT = TR –TC (1500 – 3000 = - 1500)
6. TR - TC = -1500 (LOSS/ CLOSED FIRM BECAUSE AVC >
AR)

26. EQUILIBRIUM FIRM IN THE SHORTEQUILIBRIUM FIRM IN THE SHORT
TERM AND LONG-TERMTERM AND LONG-TERM
SUPER NORMAL PROFIT (LONG TERM)
PRICE , COST, REVENEU
LMC
LAC
10 A
8
B
E
O 100
LMR LAR
OUTPUT (Q)
LAVC

27. EQUILIBRIUM FIRM IN THE SHORT TERMEQUILIBRIUM FIRM IN THE SHORT TERM
AND LONG-TERMAND LONG-TERM
Conclusion;
1.Equilibrium Conditions MC = MR
2. LAC <L AR
3.LAVC < LAR
4.TR = LAR X Q ( 10 X 100 = 1000 )
5.TC = LAC X Q ( 8 X 100 = 800 )
PROFIT = TR –TC ( 1000 – 800 = 200)
6. TR > TC = 200 (SUPER NORMAL PROFIT)

28. EXERCISEEXERCISE
1. The table below shown;
2. Calculate the TR, AR and MR.
3. Draw that curve.
Output (Q) Price Output
RM
Total Reveneu
RM
Average
Reveneu
RM
Marginal
Reveneu
RM
1 30
2 50
3 70
4 90
5 110
6 130
7 150

29. 2. Based on the table below:
Calculate TR, AR, MR, AC,AVC,MC , P/L
Draw that curve.
Output
(Q)
P TR AR MR TC AC AVC MC P/L
0 - - - - 200 - - - -
1 50 280
2 75 300
3 100 330
4 125 375
5 150 435
6 175 510
7 200 630
8 225 760
9 250 910

30. EXERCISEEXERCISE
1. When firms are in equilibrium, the following will happen:
a)
b) Prices of goods = AR
2.Demand curve faced by firms is less than a monopoly. This means
that marginal revenue is the result of both average and evaluation of
___________________marginal and average revenue______________
when the firm increases output.
3. Output of firms deemed to be issued with a monopoly is not an
efficient way that does not produce output because average cost is not
the _________________________ or economic resources are not
distributed efficiently regarded as not the same as _________________
______________________