Monopoly: This is a situation where a single producer (firm) is the sole producer of a good that has...
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![Page 1: Monopoly: This is a situation where a single producer (firm) is the sole producer of a good that has no close substitutes.](https://reader036.fdocuments.net/reader036/viewer/2022082713/56649efb5503460f94c0d681/html5/thumbnails/1.jpg)
Monopoly:Monopoly:
This is a situation where a single producer (firm) is the sole producer of a good that has no close substitutes.
This is a situation where a single producer (firm) is the sole producer of a good that has no close substitutes.
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Sources of Monopoly:Sources of Monopoly:
The firm may control the entire supply of raw materials required to produce that output.
The firm may have a patent or copyright.
The case of “Natural Monopoly”. Economies of Scale may permit only one firm to be efficient in the market.
The case of Government Franchises.
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Characteristics of Monopoly:Characteristics of Monopoly:
A single seller: A single firm produces all industry output. The monopoly is the industry.
Blockaded entry and exit: Firms are heavily restricted from entering or leaving the industry.
Imperfect dissemination of information: Cost, price, and product quality information are withheld from uninformed buyers.
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Rate of Return on Stockholders’ Equity:Rate of Return on Stockholders’ Equity:
Equity
IncomeNet ROE
Stockholders’ Equity = The book value of total assets minus total liabilities.
Equity
Assets Total
Assets Total
Sales
Sales
IncomeNet ROE
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Monopolistic Competition:Monopolistic Competition:
It is a form of market organization in which there are many sellers of a heterogeneous or differentiated product, and entry into and exit from the industry are rather easy in the long run.
Differentiated Product:Differentiated Product:
Products which are similar but not identical and satisfy the same basic need.
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Characteristics:Characteristics:
Large number of buyers and sellers.
Product Heterogeneity.
Free Entry and Exit.
Perfect dissemination of information.
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