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C

OMPARE THE FEATURES OF PERFECT THE FEATURES OF PERFECT

COMPETITION AND MONOPOLY

MARKET STRUCTURES

Group : 01

LOGO

05.03.2014

Economics

Group Presentation

HND: Qs 03

BCAS- Jaffna

1GROUP MEMBERS

KADOTGAJAN

BAKEERATHAN

SUMAN

VINOJ

SAKEESAN

2CONTENTS

1.

Introduction.

2.

Characteristics Of Perfect Competition

Market.

3.

Characteristics Of Monopoly Market.

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4.

Compare And Contrast.

5.

Conclusion.

34Introduction

Definition of Perfect Competitive market.

Definition of Monopoly market.

Characteristics of Perfect Competitive

market.

Large member of buyers and sellers.

Free entry and exit.

Buyers and sellers are price takers.

Can earn ordinary profit in long term.

5

Characteristics of Monopoly market.

Single seller

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No close substitutes

Barriers

to

entry

Can earn Abnormal Profits

Compare and Contrast.

Conclusion.

67Perfect Competition Market

Perfect competition is a market structure

where there are large number of buyers

and

sellers.

8Characteristics of Perfect Competition

Market

Large member of buyers and sellers.

Free entry and exit.

Perfect knowledge.

Identical product.

No government intervention.

Buyers and sellers are price takers.

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Can earn ordinary Profit in Long Term

9Profit-Maximizing Level of Output

The goal of the firm is profit maximization.

Profit = Total revenue - Total cost.

A

firms

Equilibrium Equilibrium

point

is

MC=MR

10Profit-Maximizing

11Shutdown

A short-run decision to not to produce anything

because of the market circumstances

If shutdown in short-run, must still pay fixed cost

Exit

A long-run decision to leave the market

If exit in long-run, zero costs

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Sunk cost

The expenditure that has already been cannot be

recovered

12Zero-Profit condition

The situation where the firms earn zero profit

Zero economic profit occurs when P=ATC

1314What is Monopoly?

Monopoly is a market structure where there is

only a single seller with complete control of the

whole industry.

The main cause of monopoly is the entry barriers

Factors

of

Monopoly.

1. Resource

2. Government

3. Natural factors

15Characteristics of Monopoly Market

Single seller

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Lack of Perfect knowledge

No close substitutes

16

Barriers to entry

Price discrimination

Price maker

Can earn Abnormal Profits Monopoly

17Deadweight loss due to Monopoly

18Monopoly's Revenue

Quantity Price Total

Revenue

Average

Revenue

Marginal

Revenue

0 11 0 ------- -----

1 10 10 10 10

2 9 18 9 8

3 8 24 8 6

4 7 28 7 4

5 6 30 6 2

6 5 30 5 0

7 4 28 4 -2

8 3 24 3 -4

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Large numbers of firms and buyers Single firm with le

ss buyers

A single firm cant effect the price A single firm

can effect the price

Producer is Price Taker .. Price maker ..

Consumers Sovereignty (Power)

exists

Producers Sovereignty

No barriers to enter the market Barriers to enter th

e market

26

Perfect Competition Market Monopoly MarketDifferences cont.

Perfect Competition Monopoly

Price Discrimination is not possible

Price Discrimination is possible

Equilibrium Pricing Condition ..

27

Perfect Competition Market Monopoly MarketDifferences cont.

Perfect Competition Monopoly

Close Substitution exists

No Substitutions

MR=AR=P=D

Price > MC.

Demand curves Shape (Ed ) .. Demand curves Shape (Ed < ,

>, = 1)..

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28

Perfect Competition Market Monopoly MarketDifferences cont.

Perfect Competition Monopoly

Profit in Short Run Short Run

Normal, Abnormal, Loss

Abnormal profit.

Profit in Long Run Long Run

Normal

Super Abnormal profit.

29Differences cont.

Perfect Competition :

Normal, Abnormal, Loss in

SR

and

Normal Profit in

LR

30Differences cont.

Monopoly :

Abnormal profit & Super Abnormal Profit.

in

SR and LR

3132Conclusion

Several Several Real world examples examples

Perfect Competition:

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Agricultural markets

Fish market and vegetable or fruit vendors

Free

software

vendors

Street food vendors

Monopoly

Ceylon Petroleum Cooperation

Sri Lankan Railways

Drugs for Aids patients

33Perfect Competition & Monopoly

in Contemporary scenario

Both markets doesn't exist

Because;

Governments influences

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Privatization/ Globalization

Sales

Promoting Promoting

Strategies Strategies i..e.. Ads

So we can conclude conclude that the Perfect Perfect Competition Competition

& Monopoly Monopoly markets markets are conceptual conceptual markets markets in

the Contemporary Contemporary scenario scenario..

34Questions?

35LOGO

36