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Introduction
Types of Monopoly Power
Features Monopoly Power
Sources of Monopoly Power
Equilibrium of Monopoly Firm
Comparison Between Perfect Competition &
Monopoly
Advantages & Disadvantages
Wastage Under Monopolistic Competition
Conclusion
What is Monopoly ?
1. Mono – one
BEST BUSES
Monopoly in Food Items
No
Close Substitutes : The commodity sold by
Monopolist has no close substitute
Cont..
FEATURES OF MONOPOLY
No entry : To monopoly market entry is completely
restricted. if entry is allowed or anybody succeeds to
enter the market and produce a close substitute the
monopolist will be no more a monopolist.
Cont..
Sources of Monopoly Power
Business Reputation: Reputed firms acquire
monopoly power as they have no financial
difficulties and they do not require extra efforts to
attract the customers.
Economies of large scale: Big and old firms enjoy
the benefits of large scale production they have
huge capital, technology, and can produce goods at
low cost and supply at low prices which may confer
them monopoly power.
Creation of artificial barriers to new competition:
Firm may adopt tactics like heavy advertising, limit
pricing policy etc. to reduce new entry and
competition to establish a monopolistic position.
Comparison Between Perfect Competition and
Monopoly
Characteristics Perfect Competition Monopoly
6 3
7 2
4
AR
2
Quantity
0
1 2 3 4 5 6 7
-2
AR and MR curves for a firm facing a downward-sloping D curve
Q P TR MR
8 (units) =AR (£) (£)
1 (£)
8 8
6
2 7 14
4
3 6 18
6 5 2
4 20
0
5 4 20
-2
AR, MR (£)
6 3 18
-4
7 2 14
4
AR
2
Quantity
0
1 2 3 4 5 6 7
-2 MR
AR and MR curves for a firm facing a downward-sloping D curve
8
Elastic
Elasticity = -1
6
AR, MR (£)
Inelastic
4
AR
2
Quantity
0
1 2 3 4 5 6 7
-2 MR
SHORT – RUN EQUILIBRIUM
Profit in Loss in
Short-Run Short-Run
Equilibrium Equilibrium
PROFIT IN SHORT RUN CASE
16 MC
Total Profit =
£1.50 x 3 = £4.50
12
Costs and Revenue (£)
AC
a
8
6.00
TOTAL PROFIT b
4.50
4 AR
Quantity
0 MR
1 2 3 4 5 6 7
LOSS IN SHORT- RUN CASE
£ MC
SAV
SAVC
Cost and Revenue
L T
LOSS S
P
P1 M
E
AR = D
MR
O Q
LONG-RUN EQUILIBRIUM
Profit of a Monopolist
CONCLUSION