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IMPERFECT COMPETITION
In economic theory, imperfect competition is the competitive situation in any market where the conditions necessary for perfect competition are not satisfied.
MONOPOLY
Monopoly is said to exist when one firm is
FEATURES OF MONOPOLY
Single seller in the market
No close substitute
No competition Price maker Monopoly is also an industry Difficult entry of new firms
MC
P Price R
AR MR
X
Output
P Price R
AC
AR
E
MR
X
Output
P Price R
B A E
AC AVC AR
MR
X
Output
MC
AC
P Price R
AR MR
X
Output
P Price R
AC
AR
E
MR
X
Output
P Price R
B A E
AC AVC AR
MR
X
Output
AR is downward sloping
Monopolist always sell the product higher than the Average cost Supernormal profit occurs even in long run.
COMPARISON
PERFECT COMPETITION
Government interfference is there.
MONOPOLY
Government interference is not there.
MONOPOLISTIC COMPETITION
Monopolistic Competition is a form of market structure in which large number of independent firms are supplying products that are slightly differentiated from the point of view of buyers.
The products of the competing firms are close but not perfect substitutes because buyers do not regard them as identical.
Each firm is, therefore, the sole producer of a particular brand or product. It is a monopolist as far as that particular product is concerned.
Contd.
Since the various brands are close substitutes, a large number of monopoly producers of these brands are involved in keen competition with one another.
This type of market structure, where there is competition among large number of monopolists is called Monopolistic Competition.
The demand curve is downward sloping. The demand curve of the firm in a monopolistically competitive market is however more elastic than that of a firm in a pure monopoly.
Gradually in the long run the firms demand curve becomes tangent to its average curve, the firm earns only normal profits.
OLIGOPOLY
OLIGOPOLY
The Term Oligopoly has been derived from two
Greek words.
Oligi which means few and Polien means sellers. Market structure in which there are a few sellers selling homogeneous or differentiated products to many buyers.
TYPES:
Pure oligopoly: - The products produced by the firms are homogeneous ,today pure oligopoly is not found.
Differentiated oligopoly: the products produced by the firms are close substitutes and in the present world differentiated oligopoly is found.
Characteristics:
Few sellers Homogeneous or differentiated product Blocked entry and exit Inter-dependence Uncertainty Advertising Constant struggle Price rigidity
Total Revenue B
Total Revenue A
Total Revenue B
Kinked D Curve
D = elastic
D = Inelastic
100
Quantity
Cartel
Price leadership
Cartel
Existing firms forms an agreement.
Its designed to earn profit to the collaborating firms. Example: OPEC International cartel in the worlds petroleum market.
Price Leadership
A traditional leader in the oligopoly market announces price changes from time to time which others follow. The dominant firm may assume the price leadership. There is barometric price leadership when a smaller firm tries out a new price, which may or may not be recognized by the larger firms.
DUOPOLY
The word duo means two and pollen means to sell. Duopoly is a market situation in which there are only two sellers producing and selling either identical or differentiated ones.
Features of duopoly:
It is a form of imperfect competition Two sellers selling goods in the market. The firms produce and sell either identical products or differentiated ones. The two forms may either resort to competition or collusion. It is a simple form of oligopoly.
Legal sanction.
Preference of buyers.
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