Monopoly
Monopoly
Table of content 1. Market structure 2. Introduction to Monopoly 3. Features of Monopoly 4. Types of Monopoly
5. Average revenue and Marginal revenue 6. Elasticity under Monopoly 7. Equilibrium Under Monopoly 8. Price discrimination
Market structure
Perfect competition Pure Monopoly
More competitive
Market structure
Perfect competition Pure Monopoly
Less competitive
Market structure
Perfect Competition Pure Monopoly
Monopolistic Competition
Oligopoly
Duopoly Monopoly
The right on the scale, the greater the degree of monopoly power exercised by the firm.
Monopoly
"Monopoly refers to a market where there is a single seller for a product and there is no close substitute of the commodity that is offered by the sole supplier to the buyers. The firm constitutes the entire industry".
The word monopoly is a Latin term. 'Mono' means single and 'poly' means seller. Monopoly is a form of market organization in which there is only one seller of the commodity. There are no close substitutes for the commodity sold by the seller.
Features of Monopoly
Single person or a firm
No close substitutes
Price maker
Types of Monopoly
Natural monopoly Legal monopoly
Public monopoly
Private monopoly
Simple monopoly
Discriminating monopoly
Perfect monopoly
Imperfect monopoly
Here marginal revenue is positive. A monopolist does not push his produce to the point where the marginal revenue becomes negative. The monopolist choice of price when faced with varying degree of elasticities is now explained with the help of a diagram.
When there is no threat of the entry of new firms into the industry, the monopoly firm makes long run adjustments in the scale of plant. If the market size is large and permits to expand output, then the monopolist would build an optimum scale of plant and would produce goods at the minimum cost per unit. The long run equilibrium of a monopoly firm is now explained with the help of the following diagram.
The practice on the part of the monopolist to sell the identical goods at the same time to different buyers at different prices when the price difference is not Justified by difference in costs in called price discrimination. In the words of Mrs. Joan Robinson
Personal Discrimination
It is personal, when separate price is charged from each buyer according to the intensity of his desire or according to the size of his pocket. For example, a doctor may charge RS.20,000 from a rich person for an eye operation and RS.5,000 only from a poor man for the similar operation.
Trade discrimination
It may take place when a monopolist charges different prices according to the uses to which the commodity is put. For example, an electricity company may charge low rate for electric current used in an industrial concern than for the electricity used for the domestic purpose.
Local Discrimination
It occurs when a monopolist charges different prices for the same commodity at different places. This type of discrimination is called dumping. For example, charges for cold drinks are high in theater or in hotel then in any outlet or retail shop