2. There are four basic types of market structures by
traditional economic analysis:
perfect competition
monopolistic competition
oligopoly
monopoly
A monopoly is a market structure in which a
single supplier produces and sells a given
product. If there is a single seller in a certain
industry and there are not any close substitutes
for the product, then the market structure is that
of a "pure monopoly"

3. MEANING OF MONOPOLY
 A monopoly exists when a specific person or enterprise
is the only supplier of a particular commodity.
 The verb "monopolize" refers to the process by which a
company gains the ability to raise prices or exclude
competitors.
 In economics, a monopoly is a single seller.
 In law, a monopoly is business entity that has significant
market power, that is, the power, to charge high prices.

4. Characteristics
 Profit Maximize
 Price Maker
 High Barriers to Entry
 Single seller and large no of buyers
 Price Discrimination
 Monopoly is Also an industry
 Demand curve under monopoly is downward
sloping
 No selling cost required

5. How is Short run
equilibrium of monopoly is
determined?
 Short run is a period in which monopolist can change
only variable factors.
 Fixed factors like machinery, plant cannot be changed.
 If demand increases monopolist will utilize fixed factors
to their maximum capacity and using more of variable
factors.

6. A monopolist will be in
equilibrium when 2 conditions
satisfied:-
 MC=MR
 MC cuts MR from below
Monopolist in equilibrium may face 4
situations in short period:-
Super normal profit- AR>AC
Normal profits- AR=AC
Minimum losses- AR<AC but AVC is
covered
Shut down point- AR<AVC

7. SUPER NORMAL PROFIT
 AR>AC monopolist will get super normal profits

8. Normal Profits
 In this situation AR=AC

9. MINIMUM LOSSES
 In this situation AR<AC but AVC is covered.

10. Shut down point
 In this situation AR<AVC

11. DETERMINATION OF LONG RUN
EQUILIBRIUM UNDER MONOPOLY
 Long run is a period when monopolist can vary all
the factors and supply can be increased in response
to increase in demand.
2 conditions need to be satisfied
 long run MC is equal to MR
 long run MC cuts MR from below

12. In long run a monopolist is
not contented only with
normal profits, rather it is in
position to earn S.N.P
Thus fix price in such a way
that there is S.N.P i.e.
AR>LAC

14. MONOPOLY EQUILIBRIUM AND
LAW OF COSTS
 Whether a monopolist will fix more or less price of
his product in the long run depends upon 2 things:
 1. elasticity of demand
 2. effect of laws of costs on monopoly price
determination

15. DIMINISHING COSTS
 Output obeys law of
diminishing costs means
as Production increases
its cost per unit goes on
diminishing.
 In this situation it is
advisable for the
monopolist to fix low
price per unit and
expand his sales in order
to maximize profit.

16. INCREASING COSTS
 Production obeys the
law of increasing
costs, means as
production increases
– the cost of
production also
increases.
 It will be beneficial
for the monopolist to
produce less and fix
high price per unit.

17. CONSTANT COSTS
 In this situation
cost of production
remain constant
whether
production is more
or less.

18. Monopoly price with zero cost of
productions
 It is situation
where monopolist
has to incur no
cost of production
for producing the
output.

19. Comparison between monopoly and
perfect competition
 Goal of firm
 Assumption regarding production
 Assumption regarding number of sellers and buyers
 Assumption regarding entry
 Implication regarding shape of demand curve
 Implication regarding decisions
 Control over price

20. How is price and output determined
under discriminating monopoly?
Meaning of price
discrimination-
 A monopolist often charges different prices of the
same product from different consumers of different
industries. This price policy of monopolist is called
price discrimination.

21. Kinds of discriminating
policies
Personal price discrimination
Geographical price discrimination
Price discrimination according to use

22. CONDITIONS FOR PRICE
DISCRIMINATION
 Existence of monopoly
 Separate market
 Difference in elasticity of demand
 Expenditure in dividing and sub dividing market to
be minimum
 Commodity to order
 Legal sanction
 Product differentiation
 Behavior of consumer

23. Equilibrium under discriminating
monopoly
 The aim of monopolist under discriminating
monopoly is to maximize total revenue and profit.
Conditions: MR=MC, MC cuts MR from below.
The discriminating monopoly is to decide about how
much of the out[put is to be sold in diff markets and
at what [price so as to get max profit.

24. To get max profit 2 conditions must
be:
 MR in both markets should be
same
 MR(A)= MR(B) =MC

25. DEGREES OF PRICE DISCRIMINATION
 DISCRIMINATION OF 1ST DEGREE-It refers to that
discrimination where in monopolists charges
different prices for each unit of commodity
 DISCRIMINATION OF 2ND DEGREE-It refers to
that discrimination under which a monopolist
sells a product at different prices in such a way
that those who are prepared to pay more than
price X are charged price X . On the contrary
those who are prepared to pay less than price X
and more than price Y are made to pay price Y for
the product .

26.  DISCRIMINATION OF 3RD DEGREE- It
refers to that discrimination under which a
monopolist divides the entire market of a
product into 2 – 3 groups and charges different
price from each group.
 For instance , a monopolist charging higher price
of a product in the domestic market and lower
price in the foreign market , dis discrimination
found in real life.

27. Thanks
ROSHNI KAPOOR
RAVNEET KAUR