PPT On Theory Of Firm Monopoly

Presentation On Theory Of Firm Monopoly
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Theory Of Firm Monopoly Presentation Transcript:
1.Theory of firm

2.Monopoly
Situation in which a single company or group owns all or nearly all of the market for a given type of product or service.

3.Monopoly – Assumptions
There is only one seller in the market.
Barriers to entry exists.
Due to the fact that monopolist is the industry, it is the price maker.
Monopolist is able to make abnormal profits.

4.Barriers to entry
Economies of scale
Natural Monopolies
Branding
Legal Barriers

5.Anti-competitive behaviour
Dumping
Exclusive dealing
Price fixing
Limit Pricing
Tying
Resale price maintenance

6.Revenue and demand curves

7.Monopoly and efficiency

8.Advantages of monopoly
It may be able to achieve substantial economies of scale
The monopolist can use part of its supernormal profits for R & D and investment;
There are those who maintain that a monopolist has gained his status by being the most efficient in the industry.
The promise of abnormal profit, protected perhaps by patent may encourage the development of new monopoly industries producing new products

9.Disadvantages of monopoly
It may charge higher price and produce a lower output
even if it is not using the most efficient technique of production;
The monopolist can still make large profits
It may have less incentive to be efficient and innovate.
In the long run there will still be higher price and lower output

10.What is Price Discrimination
As long as a firm faces a downward-sloping demand curve and thus has some degree of monopoly power, it may be able to engage in price discrimination.
Price discrimination can only be a feature of monopolistic and oligopolistic markets
Price discrimination or price differentiation exists when sales of identical goods or services are transacted at different prices from the same provider