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MONOPOLY

Presented By:Shajabee

DeepaSangeeta chouhan

RuchikaDeepika

Presented To:

Mam saroj

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Monopoly is a market situation where thereis a single firm selling the commodity andthere is no close substitute of the commoditysold by the monopolist

Monopoly is a form of the market in whichthere is a single seller or producer of acommodity . There are no close substitutes of

the monopoly product and there Legal,Technical or Natural barriers to the entry ofnew firms in the monopoly market.

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The fundamental cause of

monopoly is barriers to entry.

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Cont

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Capital Requirement

Control Over Inputs

Legal Restrictions

Strategic Barriers

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1)Grant Of Patent Rights

2)Licensing By Government

3).Forming By Cartel

4).Miscellaneous

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1).Single Seller Of The Commodity2).Absence Of Close Substitute OfProduct

3)Difficult Entry Of New Firm4)Negatively Sloped Demand Curve

5).Price Marker With Constraint

6)Price Discrimination

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(i)High Level of skills

(ii) Patent rights

(iii) Public monopoly (iv) Over production

(v)Advertisement

(i)Less Output

(ii)High Price

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TR

Q

1 20 20 20 -2 18 36 18 16

3 16 48 16 12

4 14 56 14 8

5 12 60 12 4

6 10 60 10 0

7 8 56 8 -4

8 6 48 6 -8

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(a)Total revenue and Total cost approach

(b)Marginal revenue and Marginal cost

approach

(a)In short period

(b)In Long period

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PROFIT

MC

AC

AR

MR

F

G

E

P

R

Y

Xo

Quantity of production

Re

venueandc

ost

(Total profit)=

(AR-AC)x(quantityproduced)

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10 30 300 - 250 - 50

11 29 319 19 268 18 5112 28 336 17 285 17 51

13 26 338 2 300 15 38

14 24 336 -2 313 13 23

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Monopoly Price During ShortRun

SupernormalProfit(Ap x

CA=CAPB)

0X

Y

PRIC

E

REVENUE

SMC=MR

MR

M

SAC

SMC

PROFIT

AR

EA

B

C

P

OUTPUT

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X

T

SMC

SAC

AR

MR

Q0

Y

E

NORMAL PROFIT

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SMC

SAC

Y

X

SP

R T

0Q

AR

MR

SMC=MRE

MINIMUMLOSS

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LAC

AR

X

Y

PROFITPK

L

LMC

MR

0 Q

PRICE

COST

LONG RUN

E

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Fear of possible competition Fear of substitute commodities

Public Bycott

Elasticity Of Demand Of Concernedcommodity

Laws of Returns

Fear of nationalization

Enlightened and Progressive Monopolist

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Control On Price And Production Restriction On Malpractices

Publicity Of Evils Of Monopoly

Encouragement To Consumers Associations Public Ownership And Management

Prohibition On Emergence Of Monopoly AndBreak Of Monopoly

Encouragement to Co-operative Productionand Distribution

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A very largenumber of seller ofproduct

Product areHomogeneous Free entry and exit

of a firms Price is uniform in

the market. Price=MC

A single seller(firm)of product Product are no

close substitute Very difficult entry

of a new firm Due to Price

discrimination.price is notuniform.

Price>MC

Perfect Competition Monopoly

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There is singlefirm

Product has no

close substitute Product is

homogeneous Entry of new firm

very difficult Selling costs are

almost null.

There are many firms Product has many

close substitutes Product are

differentiated Entry of new firm in

the market is free. Heavy selling costs

are incurred

MONOPOLY MONOPOLISTICCOMPETITION

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DEMAND CURVE FOR A MONOPOLY

FIRMDm : DEMAND CURVEFOR

A MONOPLOYFIRM

Y

X

DM

P

P1

0

Q Q1

QUANTITY

PRICE

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