MONOPOLY MONOPOLY Asst. Prof. Dr. Serdar AYAN. Causes of Monopoly u Legal restrictions u Patents u Control of a scarce resources u Deliberately-erected.

Slides:

Advertisements

Similar presentations

12 Prepared by: Fernando Quijano and Yvonn Quijano © 2004 Prentice Hall Business PublishingPrinciples of Economics, 7/eKarl Case, Ray Fair Monopoly.

Advertisements

MONOPOLY GROUP 1 – Jubal, Jobi, Madhuri, Santosh, Vinayak, Devendra, Noel, Owais, Masroor.

Chapter Twenty-Four Monopoly. Pure Monopoly u A monopolized market has a single seller. u The monopolist’s demand curve is the (downward sloping) market.

Part 7 Monopoly Many markets are dominated by a single seller with market power The economic model of “pure monopoly” deals with an idealized case of a.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Monopoly u A monopoly is the sole seller of its product.  its product does not.

Monopoly. Monopoly: Why? u Natural monopoly (increasing returns to scale), e.g. (parts of) utility companies? u Artificial monopoly –a patent; e.g. a.

Chapter 9 – Profit maximization

Introduction A monopoly is a firm that is the sole seller of a product without close substitutes. In this chapter, we study monopoly and contrast it with.

Monopoly - Characteristics

Monopoly While a competitive firm is a price taker, a monopoly firm is a price maker. A firm is considered a monopoly if it is the sole seller of.

12 MONOPOLY CHAPTER.

Copyright©2004 South-Western 15 Monopoly. Copyright © 2004 South-Western A firm is considered a monopoly if... it is the sole seller of its product. its.

The Production Decision of a Monopoly Firm Alternative market structures: perfect competition monopolistic competition oligopoly monopoly.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Monopoly u A monopoly is the sole seller of its product.  its product does not.

Market Structures Monopoly. Monopoly  Defining monopoly  Only one seller  Barriers to entry  economies of scale  product differentiation and brand.

Imperfect Competition and Market Power: Core Concepts Defining Industry Boundaries Barriers to Entry Price: The Fourth Decision Variable Price and Output.

Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets Copyright © 2014 McGraw-Hill Education. All rights reserved.

Perfect Competition Chapter 8.

Introduction to Monopoly. The Monopolist’s Demand Curve and Marginal Revenue Recall: Optimal output rule: a profit-maximizing firm produces the quantity.

The Four Market Models How do businesses decide what price to charge and how much to produce? It depends on the character of its industry.

© 2010 W. W. Norton & Company, Inc. 24 Monopoly. © 2010 W. W. Norton & Company, Inc.  Pure Monopoly u A monopolized market has a single seller. u The.

Chapter 24 Monopoly. 2 Pure Monopoly A monopolized market has a single seller. The monopolist’s demand curve is the (downward sloping) market demand curve.

Chapter 10 Monopoly. Chapter 102 Review of Perfect Competition P = LMC = LRAC Normal profits or zero economic profits in the long run Large number of.

Chapter 15 notes Monopolies.

Copyright©2004 South-Western Monopoly. Copyright © 2004 South-Western While a competitive firm is a price taker, a monopoly firm is a price maker.

©2002 South-Western College Publishing

Chapter 9 Pure Competition McGraw-Hill/Irwin

Monopoly ETP Economics 101. Monopoly  A firm is considered a monopoly if...  it is the sole seller of its product.  its product does not have close.

1 Monopoly and Antitrust Policy Chapter IMPERFECT COMPETITION AND MARKET POWER imperfectly competitive industry An industry in which single firms.

MONOPOLY Why do monopolies arise? Why is MR < P for a monopolist?

This is a PowerPoint presentation on markets where firms have some degree of market power. A left mouse click or the enter key will add and element to.

CHAPTER 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies,

10 Monopoly The price of monopoly is upon every occasion the highest which can be got. ADAM SMITH Monopoly The price of monopoly is upon every occasion.

Chapter 25: Monopoly ECON 152 – PRINCIPLES OF MICROECONOMICS

Copyright © 2006 Pearson Education Canada Monopoly 13 CHAPTER.

1 Monopoly. 2 Monopoly- assumptions  One seller  Many buyers  Entry and exit into the market: very difficult or prohibited  Monopolist usually produce.

The Production Decisions of Competitive Firms Alternative market structures: perfect competition monopolistic competition oligopoly monopoly.

Monopoly Story of NES, Comcast, even Central Parking.

Chapter 7: Pure Competition. McGraw-Hill/Irwin Copyright  2007 by The McGraw-Hill Companies, Inc. All rights reserved. What is a Pure Competition? Pure.

Chapter 7: Pure Competition Copyright © 2007 by the McGraw-Hill Companies, Inc. All rights reserved.

Hall & Leiberman; Economics: Principles And Applications, Market Structure Sellers want to sell at the highest possible price Buyers want to buy.

Chapter 12 Monopoly. Basic Definitions Imperfect Competition: Occurs when firms in a market or industry have some control over the price of their output.

Chapters (8) Perfect Competition (8) Monopoly (8).

Copyright©2004 South-Western 15 Monopoly. Copyright © 2004 South-Western Monopoly While a competitive firm is a price taker, a monopoly firm is a price.

Review pages Explain what it means to say that the monopolist is a “price maker.” 2. Explain the relationship between output and price for.

Chapter 25 Monopoly. 2 Learning Objectives  Identify situations that can give rise to monopoly  Describe the demand and marginal revenue conditions.

1.  exists when a single firm is the sole producer of a product for which there are no close substitutes. 2.

And Unit 3 – Theory of the Firm. 1. single seller in the market. 2. a price searcher -- ability to set price 3. significant barriers to entry 4. possibility.

1 Monopoly Molly W. Dahl Georgetown University Econ 101 – Spring 2009.

Firms in Markets.

Pure Competition in the Short Run 10 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

CH13 : MONOPOLY CH13 : MONOPOLY Asst. Prof. Dr. Serdar AYAN.

Monopoly 1. Why Monopolies Arise Monopoly –Firm that is the sole seller of a product without close substitutes –Price maker Barriers to entry –Monopoly.

Monopoly 15. Monopoly A firm is considered a monopoly if... it is the sole seller of its product. it is the sole seller of its product. its product does.

Pure Competition Chapter 8.

Forms of Markets.

(normal profit= zero econ. profit)

24 C H A P T E R Pure Monopoly.

©2002 South-Western College Publishing

Pure Competition in the Short-Run

23 Pure Competition.

ECN 201: Principles of Microeconomics

Monopoly (Part 1) Chapter 21.

CH13 : MONOPOLY Asst. Prof. Dr. Serdar AYAN

Market Structures I: Monopoly

Monopolistic competition

LEARNING UNIT: 9 MARKET STRUCTURES: PERFECT COMPETITION.

Presentation transcript:

MONOPOLY MONOPOLY Asst. Prof. Dr. Serdar AYAN

Causes of Monopoly u Legal restrictions u Patents u Control of a scarce resources u Deliberately-erected entry barriers. - Technical superiority - Economies of scale

3 of 26 Forms of Imperfect Competition and Market Boundaries Pure monopoly An industry with a single firm that produces a product for which there are no close substitutes and in which significant barriers to entry prevent other firms from entering the industry to compete for profits. Natural monopoly An industry that realizes such large economies of scale in producing its product that single-firm production of that good or service is most efficient.

Monopoly: Why? u Natural monopoly (increasing returns to scale), e.g. utility companies u Pure monopoly –a patent; e.g. a new drug –sole ownership of a resource; e.g. a toll bridge –formation of a cartel

Monopoly: Assumptions u Many buyers u Only one seller i.e. not a price-taker u (Homogeneous product ~ no close substitute) u Perfect knowledge u Restricted entry (and possibly exit)

6 of 26 Price and Output Decisions in Pure Monopoly Markets Demand in Monopoly Markets  FIGURE 13.2 The Demand Curve Facing a Perfectly Competitive Firm Is Perfectly Elastic Perfectly competitive firms are price-takers; they are small relative to the size of the market and thus cannot influence market price. The implication is that the demand curve facing a perfectly competitive firm is perfectly elastic. If the firm raises its price, it sells nothing and there is no reason for the firm to lower its price if it can sell all it wants at P* = $5.

Monopoly: Features u The monopolist’s demand curve is the (downward sloping) market demand curve u The monopolist can alter the market price by adjusting its output level.

Monopoly: Market Behaviour y = Q p(y) Higher output y causes a lower market price, p(y). D

Monopoly: Market Behaviour At the profit-maximizing output level, the slopes of the total revenue and total cost curves are equal, i.e. MR = MC

Monopoly: Market Behaviour What output level maximizes profit? Suppose that the monopolist seeks to maximize economic profit

TABLE 13.1 Marginal Revenue Facing a Monopolist (1) Quantity (2) Price (3) Total Revenue (4) Marginal Revenue $

Monopoly: Equilibrium y = Q P MR Demand

Monopoly: Equilibrium y P MC MR Demand

Monopoly: Equilibrium y P ATCATC MC MR Demand AR

Monopoly: Equilibrium y P ATCATC MC MR Output Decision MC = MR ymym Demand

Monopoly: Equilibrium y P ATCATC MC MR Demand P m = the price ymym PmPm

Monopoly: Equilibrium y P ATCATC MC MR Demand The shaded area is the excess profit ymym PmPm

18 of 26 Price and Output Decisions in Pure Monopoly Markets The Monopolist’s Profit-Maximizing Price and Output  FIGURE 13.5 Price and Output Choice for a Profit- Maximizing Monopolist A profit-maximizing monopolist will raise output as long as marginal revenue exceeds marginal cost. Maximum profit is at an output of 4,000 units per period and a price of $4. Above 4,000 units of output, marginal cost is greater than marginal revenue; increasing output beyond 4,000 units would reduce profit. At 4,000 units, TR = P m AQ m 0, TC = CBQ m 0, and profit = P m ABC.