Monopoly
Transcript of Monopoly
MONOPOLY
1
Presented By
Shubhangi SinhaManisha SinghSonali AhiwaleNeelam ShindeNehali UpashamRohinee Ghuge
2
IntroductionMONO = means “One” +POLY = means “ Sell”
One Seller/ One Producer
• Monopoly is the polar opposite of perfect competition.
• Monopoly is a market structure in which a single firm makes up the entire market. 3
Definition Of Monopoly• According to PROF. CHAMBERLAIN,” Monopoly refers to
the control over supply.”
• According to PROF.ROBERT TRIFFIN ,”Monopoly is a market situation in which the firm is independent of price changes in the product of each and every other firm.”
PROF. CHAMBERLAIN
PROF.ROBERT TRIFFIN 4
Monopoly
5
Why Monopolies Arise?
• The fundamental cause of monopoly is the existence of barriers to entry.
• Monopolies exist because of barriers to entry into a market that prevent competition-• Legal barriers• Sociological barriers • Natural barriers
• Barriers to entry have three sources-• Ownership of a key resource.• The government gives a firm the exclusive right to produce some good.• Costs of production make one producer more efficient than a large number of
producers.
6
Characteristics of monopoly
Single seller
No close substitutes
Barriers to entry
Non- price competition
Price maker
Downward sloping demand
curve
7
Types of Monopolies
8
Perfect Monopoly
Imperfect Monopoly
Private Monopoly
Public Monopoly
Simple Monopoly
Discriminating Monopoly
Legal Monopoly
Natural Monopoly
Technological Monopoly
Joint Monopoly
Demerits of monopoly• Consumer options are limited.• Profits do not signal firms to enter the industry. (They can’t get in
because of the barriers to entry.)• There is allocate inefficiency. ( P > MC ) The monopolist does not
produce all units that consumers value more than it costs to make them.
9
Monopoly Market Demand Curve
Price
QuantityDemand
Because the monopoly firm is the only seller of a good, the market demand curve for the good is the same as the demand curve for the firm’s product.
10
Perfect Competition vs. Monopoly
11
Governments Role in Monopoly
• Prevent Excess Price• Regulation of quality of service• Merger Policy• Breaking up a monopoly• Investigation of Abuse of Monopoly Power
12
Price Discrimination
• Price discrimination is the ability to charge different prices to different individuals or groups of individuals.
• A price-discriminating monopolist can increase both output and profit.
• It can charge customers with more inelastic demands a higher price.
• It can charge customers with more elastic demands a lower price.
13
The Early Bird Gets a Lower Price
• Early Bird Specials—Restaurants charge special, lower prices for early diners.
• Matinees—Theaters charge less for earlier shows.
• Air Fares—Airlines charge less for flyers willing to fly “off peak,” i.e. early morning and late night.
14
Case Study
• TATA NANO• Monopoly in the lower economic segment• TATA, the only seller • No close substitutes for Nano in the market• Barriers to entry in the market(capital requirement,
technology, etc.)
15
Summary• A monopoly is a firm that is the sole seller in its market.• It faces a downward-sloping demand curve for its product.• A monopoly’s marginal revenue is always below the price of its
good.• Like a competitive firm, a monopoly maximizes profit by
producing the quantity at which marginal cost and marginal revenue are equal.
• Unlike a competitive firm, its price exceeds its marginal revenue, so its price exceeds marginal cost.
• A monopolist’s profit-maximizing level of output is below the level that maximizes the sum of consumer and producer surplus.
• Monopolists can raise their profits by charging different prices to different buyers based on their willingness to pay.
16
Thank You
17