Monopoly is a pivotal area to the study of market structures, which directly concerns normative aspects of economic competition, and sets the foundations for fields such as industrial organization and economics of regulation. There are four basic types of market structures under traditional economic analysis: perfect competition, monopolistic competition, oligopoly and monopoly...

1. MONOPOLYIn Microeconomics

2. MARKET STRUCTURES
Monopoly is a pivotal area to the study of market
structures, which directly concerns normative
aspects of economic competition, and sets the
foundations for fields such as industrial organization
and economics of regulation. There are four basic
types of market structures under traditional
economic analysis: perfect competition,
monopolistic competition, oligopoly and monopoly.

3. MARKET STRUCTURES
A monopoly is a market structure in which a single
supplier produces and sells the product. If there is a single
seller in a certain industry and there are no close
substitutes for the goods being produced, then the market
structure is that of a "pure monopoly". Sometimes, there
are many sellers in an industry and/or there exist many
close substitutes for the goods being produced, but
nevertheless firms retain some market power. This is called
monopolistic competition, whereas in oligopoly the main
theoretical framework revolves around firm's strategic
interactions.

4. MONOPOLY
In economics, a monopoly (from Greek monos (alone or
single) + polein (to sell)) exists when a specific individual or
an enterprise is the only supplier of a particular kind of
product or service.
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 its product.
• its product does not have close substitutes.

5. WHY MONOPOLIES ARISE?
The fundamental cause of monopoly is barriers to entry.
While a competitive firm is a price taker, a monopoly firm is a price
maker.
Barriers to entry have three sources:
1. Ownership of a key resource.
2. The government gives a single firm the exclusive right to
produce some good. (Patents, Copyrights and Government
Licensing)
3. Costs of production make a single producer more efficient than
a large number of producers. (Natural Monopolies)

6. MONOPOLY VS. COMPETITION
Monopoly
• Is the sole producer
• Has a downward-sloping
demand curve
• “Is a price maker”
• Reduces price to increase
sales
Competitive Firm
• Is one of many producers
• Has a horizontal demand
curve
• “Is a price taker”
• Sells as much or as little at
same price

7. FORMULAS TO REMEMBER
• TOTAL REVENUE TR= P x Q
• AVERAGE REVENUE AR= TR/Q
• MARGINAL REVENUE MR= △TR/△Q
CHANGE IN TOTAL REVNUE DIVIDED BY CHANGE IN QUANTITIY
• MARGINAL COST MC= △TC/ △Q
• AVERAGE COST AC= TC/Q
• TOTAL PROFIT TP=TR-TC

8. CHARACTERISTICS OF MONOPOLY
• Profit Maximiser: Maximizes profit.
• Price Maker: Decides the price of the good or product to be
sold.
• High Barriers to Entry: Other sellers are unable to enter the
market of the monopoly.
• Single seller: In a monopoly there is one seller of the good
who produces all the output.

9. CHARACTERISTICS OF MONOPOLY
• Market power: Market power is the ability to affect the
terms and conditions of exchange so that the price of the
product is set by the firm (price is not imposed by the
market as in perfect competition).
• Firm and industry: In a monopoly, market, a firm is itself an
industry. Therefore, there is no distinction between a firm
and an industry in such a market.
• Price Discrimination: A monopolist can change the price
and quality of the product.

10. Thank you!
C,KMS.03