final monopoly me
TRANSCRIPT
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MembersMembers
Name Roll No.
Krishnakant Mishra 73
Rohan Haldankar 66
Naresh Sirsulla 103Ashwini Patankar 83
Vasim Momin 76
Name Roll No.
Krishnakant Mishra 73
Rohan Haldankar 66
Naresh Sirsulla 103Ashwini Patankar 83
Vasim Momin 76
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ContentContent
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
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1. Mono one
2. poly - organization (Indianapolis)
3. A Monopoly is the sole supplier of a product with
no close substitutes
4. The most important characteristic of a
monopolized market is barriers to entry
New firms cannot profitably enter the market
What is Monopoly ?
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INTRODUCTIONINTRODUCTION
Monopoly is another form of market where there is
only one seller. In a pure or absolute monopoly amonopolist controls the entire supply of commodity
for which there is no substitute at all.
A Monopolist can control both the supply and price.
In Monopoly Market a Monopolist is a price makerand not a price taker like the perfectly competitive
firm.
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Types of Monopoly PowerTypes of Monopoly Power Pure Monopoly: It means single firm which solely controls the supply of a
commodity, there is no competition and he can charge any price for hisproducts, it also known as absolute monopoly
Limited Monopoly: limited monopoly means a single firm which controls thesupply of the commodity having no close substitutes but there are remotesubstitutes, he can influence the price and demand for his product is relativeinelastic.
Private monopolies: are owned and controlled by private individuals. They areprofit motivated.
Public Monopolies: are owned and controlled by the government. e.g.-Railways
owned by the government. Simple Monopoly: A simple Monopoly firm charges a uniform price to all buyers of
its product. it operates in a single market.
Discriminating Monopoly: A Discriminating monopoly firm charges differentprices from different buyers for the same product. It prevails in more than onemarket.
A strong Monopolist: Is confident and optimistic, he charges his own price for hisproducts with ought any fear for strong entry barriers for competition, no govt.intervention.
A weak Monopolist: Lacks confidence and is pessimistic as there is fear ofcompetition ,Govt. intervention and adverse reaction of consumers, so he chargesless prices for his products.
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Monopoly in Public SectorMonopoly in Public Sector
In India, Public utility service
supplied by the government arethe closest examples of Monopoly
BEST BUSES
RAILWAY
S
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Monopoly in Food ItemsMonopoly in Food Items
Canteen in Schools Snacks in Theatre
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Monopoly in Power or EnergyMonopoly in Power or Energy
GAS CYLINDER ELECTRICITY
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FEATURES OF MONOPOLYFEATURES OF MONOPOLY
Single Seller :There are no competitors. He is the soleseller. A monopolist is not threatened by any competitor.
NoCloseSubstitutes :The commodity sold byMonopolist has no close substitute
Cont..
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FEATURES OF MONOPOLYFEATURES OF MONOPOLY
No entry : To monopoly market entry is completelyrestricted. if entry is allowed or anybody succeeds to
enter the market and produce a close substitute the
monopolist will be no more a monopolist.
No distinction between firm and industry : A
monopolist being the sole seller constitutes the firm
as well as the industry. therefore there is no need for aseparate discussion of equilibrium of industry.
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Price Maker: A Monopolist is price maker and not aprice taker. He can fix his own price policy tomaximize more profit.
Absence of competition: There is no competition for
a monopolists product as he is the only seller rulingthe market.
Control over entire market supply: A monopolisthas complete control over the market supply as he is
the single producer. He can fix up the price of hisproduct depending upon the demand position for theproduct in market.
FEATURES OF MONOPOLYFEATURES OF MONOPOLY
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Sources of Monopoly PowerSources of Monopoly Power
Natural Resource: Some monopolies are due to nature.For E.g. Gold and Crude Oil, Kesar etc.
Control of Raw Materials: when a firm has ownership or
control over essential raw materials, entry of firms is
restricted and it acquires monopoly power.For e.g.-Jute in Bangladesh.
Legal Protection : Legal Protection granted by the
Govt. in the form of
E.g.. Patent rights ,Trademarks ,Copyrights, License etc.
Cont..
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Business Reputation: Reputed firms acquire
monopoly power as they have no financialdifficulties and they do not require extra efforts toattract the customers.
Economies of large scale: Big and old firms enjoythe benefits of large scale production they havehuge capital, technology, and can produce goods atlow cost and supply at low prices which may conferthem monopoly power.
Creation of artificial barriers to new competition:
Firm may adopt tactics like heavy advertising, limitpricing policy etc. to reduce new entry andcompetition to establish a monopolistic position.
Sources of Monopoly PowerSources of Monopoly Power
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Comparison Between Perfect Competition andMonopoly
Comparison Between Perfect Competition andMonopoly
Characteristics Perfect Competition Monopoly
No. of Sellers Very Large Single
Commodity Homogeneous Homogeneous/ Differentiated
Market Position Price Taker Price Maker
Nature of Demand Perfectly elastic(Horizontal Line)
Less elastic(Downward Sloping)
AR and MR AR = MR AR > MR.
Production Optimum. Usually less than optimum.
Optimum production is possible ifdemand increases.
Long-run profit Normal Excess
Nature of Price Single price. Price Discrimination.
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WASTAGE UNDER MONOPOLISTIC COMPETITIONWASTAGE UNDER MONOPOLISTIC COMPETITION
1. Excess Capacity : Monopolistically competitive firm do not
produce optimum Output. Free Entry attracts many firmscompelling each firm to share the market with others.
2. Unemployment : Excess Capacity Results in Unutilizedresources which prevents providing more Employment.
3. Cross Transport : Product differentiation leads to the
demand for a variety of same good. This could be avoidedif the product produce in a particular area is sold thereitself and consumers are satisfied with the varietiesavailable in their locality.
4. Wastage of Resources : Product differentiation by itself
results in wastages of resources. Different colors anddesigns leads to wastage of resources which could havebeen used for other purposes.
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ADVANTAGE OF MONOPOLYDVANTAGE OF MONOPOLY
No risk of over production
There is enough capital for research
Reduction in price of goods
Efficiently use of resources
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DISADVANTAGES OFMONOPOLY
DISADVANTAGES OFMONOPOLY
Exploitation of consumers
Restriction of consumers choice
Absence of competition leads to inefficiency
Increase in price of product
Exploitation of labor i.e. when price is
greater than marginal cost.
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Average andMarginal
Revenue Under
Monopoly
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Revenues for a firm facing a downward-slopingdemand curve
Revenues for a firm facing a downward-slopingdemand curve
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Revenues for a firm facing a downward-slopingdemand curve
Revenues for a firm facing a downward-slopingdemand curve
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Revenues for a firm facing a downward-slopingdemand curve
Revenues for a firm facing a downward-slopingdemand curve
AR d MR f fi f i d d l i DAR d MR f fi f i d d l i D
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-2
0
2
4
6
8
1 2 3 4 5 6 7
ARand MRcurves for a firm facing a downward-sloping D curveARand MRcurves for a firm facing a downward-sloping D curve
Q
(units)
1
23
4
5
6
7
P
=AR
()8
76
5
4
3
2
ARAR,M
R()
Quantity
AR d MR f fi f i d d l i DAR d MR f fi f i d d l i D
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-2
0
2
4
6
8
1 2 3 4 5 6 7
Q
(units)
1
23
4
5
6
7
P
=AR
()8
76
5
4
3
2
TR
()
8
1418
20
20
18
14
MR
()
64
2
0
-2
-4
MR
AR,M
R()
Quantity
ARand MRcurves for a firm facing a downward-sloping D curveARand MRcurves for a firm facing a downward-sloping D curve
AR
AR d MR f fi f i d d l i DAR d MR f fi f i d d l i D
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-2
0
2
4
6
8
1 2 3 4 5 6 7
Elasticity = -1
Elastic
Inelastic
AR,M
R()
Quantity
ARand MRcurves for a firm facing a downward-sloping D curveARand MRcurves for a firm facing a downward-sloping D curve
MR
AR
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SHORT RUN EQUILIBRIUMSHORT RUN EQUILIBRIUM
Profit in
Short-Run
Equilibrium
Loss in
Short-Run
Equilibrium
PROFIT IN SHORT RUN CASE
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6.00
4.50
0
4
8
12
16
1 2 3 4 5 6 7
T O T A L P R O F I TT O T A L P R O F I T
MR
Quantity
Costsa
ndRevenue
()
MC
AC
AR
ba
PROFIT IN SHORT RUN CASEPROFIT IN SHORT RUN CASE
Total Profit =
1.50 x 3 = 4.50
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QO
MR
P1
SAVC
AR = D
LOSS IN SHORT- RUN CASELOSS IN SHORT- RUN CASE
MCSAV
L
P
T
S
M
ECosta
ndR
evenue
LOSS
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LONG-RUN EQUILIBRIUMLONG-RUN EQUILIBRIUMProfit of a Monopolist
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CONCLUSIONCONCLUSION
Pure monopoly is rare but many firms have monopoly
power.
The Monopoly can take the market demand curve as its
own demand. A monopolist there for Faces a
downward sloping AR curve with MR curve.
Competition increases social welfare, but monopoly
is always bad!
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