First and foremost, a monopoly is a monopoly because it is the only seller in the market. This chapter looks at what is meant by a monopoly and what conditions lead to its creation. If anyone wants to buy the good, they must buy from the monopoly. These barriers are so high that they prevent any other firm from entering the market. The advantages and disadvantages of monopoly will be discussed in economics tuition by the principal economics tutor in greater detail.
A monopoly enjoys economics of scale as it is the only supplier of product or service in the market. Price competition involves competing to offer consumers the lowest or best possible prices of rival products. A regional or social variety of a language distinguished by pronunciation, grammar, or vocabulary, especially a variety of speech differing from the standard literary language or speech pattern of the culture in which it exists. First, there is only one firm operating in the market. Being a single seller is neither a sufficient nor a necessary condition for the possession of monopoly power. A monopolist is the only seller of a product for which there are no close substitutes and which is protected by barriers to entry. Notes on monopoly introduction the term monopoly is commonly understood to mean a single seller of a valuable item good or service. It is rare for a firm to have a pure monopoly except when the industry is stateowned and has a legally protected monopoly. Economics for igcse has been endorsed by university of cambridge international examinations. Chapter 9 monopoly as you will recall from intermediate micro, monopoly is the situation where there is a single seller of a good. If a monopolist is making losses, it means that it doesnt make economic sense to produce. Monopoly is at the opposite end of the spectrum of market models from perfect competition.
Thus consumers cannot buy the product from anyone but the monopolist. Although monopolies may be big businesses, size is not a characteristic of a monopoly. As the only seller, a monopoly controls the supplyside of the market completely. This document is highly rated by economics students and has been viewed 2792 times. Over 500 practice questions to further help you brush up on algebra i.
But from an antitrust perspective, even a company controlling 25% of an industry can be considered monopolistic. Cowell sticerd and department of economics london school of economics december 2004. In practice, there are many markets where businesses enjoy some degree of monopoly power even if they do not have. Nonprice competition is competing on all other features of. Firms compete in the market to increase their customer base, sales and market share and profits. The best economics o level notes, revision guides, tips and websites compiled from all around the world at one place for your ease so you can prepare for your tests and examinations with the satisfaction that you have the best resources available to you. A monopoly market is characterized by the profit maximizer, price maker, high barriers to entry, single seller, and price discrimination. And theres nothing contradictory about a monopoly making losses. This definition is abstract, just as the definition of perfect competition is abstract. In economics, monopoly and competition signify certain complex relations among firms in an industry. Meaning, definitions, features and criticism economics. Apr 30, 2020 lecture 10 price and output determination under monopoly economics notes edurev is made by best teachers of economics. These lecture notes were prepared by xingze wang, yinghsuan lin, and frederick jao specifically for mit opencourseware.
This completely new text follows on from our cambridge endorsed business studies for igcse and the science series, using all of the best features while catering for the speci. Get the complete study material, ppt, courses, question paper, mcq. A place to share knowledge on micro economics upload and share your articles on micro economics in one place upload now you can upload all kinds of documents formats like doc, docx, pdf, ppt and etc. Monopoly avoids duplication and hence wastage of resources. Lecture 10 price and output determination under monopoly. In this situation the supplier is able to determine the price of the product without fear. The monopolist maximizes profits at the optimal level of output mc mr controls the supply of the product can influence, but not control, the demand by changing the price relative to price elasticity of demand unregulated monopoly can lead to higher than competitive prices lower than competitive output. It is very difficult for a firm to enter the monopoly market. Due to the fact that monopolies make lot of profits, it can be used for research and development and to maintain their status as a monopoly. A monopoly is an economic market structure where a specific person or enterprise is the only supplier of a particular good. For example, many gulf countries have a monopoly in crude oil exploration because of abundant naturally occurring oil resources. It refers to a condition in which a single firm wields dominant power over an entire market. While the competitive demand curve is horizontal, the demand curve facing the monopolist is the negatively sloped market demand curve. The word monopoly has been derived from the combination of two words i.
The lecture notes are from one of the discussion sections for the course. In this way, monopoly refers to a market situation in which there is only one seller of a commodity. While this view does capture the basic intuition of the nature of monopoly it can be very misleading. This illustrates an important concept in economics dealing with the tendency of free markets to fail under certain conditions. Lecture notes principles of microeconomics economics. The subtopics for each lecture are related to the chapters in the textbook. A natural monopoly market structure is the result of natural advantages like a strategic location or an abundance of mineral resources. A working monopoly is any firm with greater than 25% of the industries total sales.
Managerial economics, or business economics, is a division of microeconomics that focuses on applying economic theory directly to businesses. The application of economic theory through statistical methods helps businesses make decisions and determine strategy on. Microsoft word files pdf and ppt files before publishing your articles on this site, please read the following pages. This is monopoly, chapter 10 from the book microeconomics.
July 2012 these lecture notes cover a number of topics related to strategic pricing. The purest form of a monopoly is one in which a single entity controls all of a particular industry. Chapter 15 monopoly lecture notes 16 econ 201 studocu. Monopoly is the market situation where there is a single firm selling the commodity and there is no close substitute of the commodity sold by the monopolist. A monopoly implies an exclusive possession of a market by a supplier of a product or a service for which there is no substitute. Business economics notes pdf, paper bba, bcom 2020. Microeconomics monopoly, ch 10 622 17 monopoly o n may 18, 1998, the u. Because of this, it has the power to set both the price and quantity of the good that will be sold. And just as its hard to find a market that really seems perfectly competitive in all respects.
Managerial economics notes pdf 2020 mba geektonight. All of this will give them a better image and reputation in the market. Overview define monopoly natural monopoly, bilateral monopoly emergence of monopoly natural monopoly bilateral monopoly production and pricing decisions a rule of thumb for pricing pricing in monopoly market measuring monopoly power effect of tax on monopoly welfare cost of monopoly public. Overview define monopoly natural monopoly, bilateral monopoly emergence of monopoly natural monopoly bilateral monopoly production and pricing decisions a rule of thumb for pricing pricing in monopoly market measuring monopoly power effect of tax on monopoly welfare. We focus on how a monopolist firm goes about determining the price and output that will ensure the greatest profit. Nelson thornes are proud to present you with a sample section of our new title, economics for igcse. The word monopoly actually translates as one seller. Monopolistically competitive firms have market power based on product differentiation, but barriers to entry are modest or absent. In contrast to a competitive firm, the monopoly charges a price above marginal cost b. Department of justice, with the attorneys general of 20 states and the district of columbia. This section provides lecture notes from the course.
We begin our study of monopoly by considering the price that the monopolist should charge. Most of the economic situations are composites of both perfect competition and monopoly. Form a standpoint of consumers, this high price makes monopoly undesirable c. We assume that the monopolists goal is to maximize profit. Any university student can download given bcom business economics notes and study material or you can buy bcom business economics books at amazon also. Monopoly and competition, basic factors in the structure of economic markets. The economic concept of monopoly focuses on the number and size of firms in an industry. Monopoly for its emergence notes for class 12 economics monopoly and reasons for its emergence.
A small business may still have the power to raise prices in a small industry or market. Monopoly lecture notes economics linkedin slideshare. Monopoly and monopolistic competition explain how managers should set price and output when they have market power with monopoly power, the rms demand curve is the market demand curve. Three conditions characterize a monopolistic market structure. Department of justice, with the attorneys general of 20 states and the. In business terms, a monopoly refers to a sector or industry dominated by one corporation, firm or entity. Monopoly for its emergence notes for class 12 economics. Explain how monopoly regulation influences output, price, economic profit, and efficiency. In the technical language of economics, a monopoly is an enterprise that is the only seller. Consumers satisfaction there are two sides in a market for a good demand supply created by consumers created by firms. The monopolist will receive economic profits as long as price is greater than the average total cost iii. Join s of fellow economics teachers and students all getting the tutor2u economics teams latest resources and support delivered fresh in their inbox every morning. Download business economics notes, pdf, books, syllabus for bba, bcom 2020. Monopoly characteristics include profit maximizer, price maker, high barriers to.