Topic 9 - MonopolyPrices and Markets (RMIT)Topic 9 - MonopolyPrices and Markets (RMIT)Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected])lOMoARcPSD|1675695
Topic 9. Monopoly1Topic 9MonopolyECON 1247Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected])lOMoARcPSD|1675695
Topic 9. Monopoly2Textbook Reference for topic 9•Hubbard, Garnet, Lewis and O’Brien, Microeconomics,Chapter 9ECON 1247Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected])lOMoARcPSD|1675695
Learning Objectives:1.Define monopoly.2.Describe the main characteristics of monopolies.3.Explain how a monopoly determines price and output. 4.Use a graph to illustrate how a monopoly affects economic efficiency.5.Discuss government policies towards monopolies.6.Compare and contrast a monopolist to a perfectly competitive firm.ECON 1247Topic 9. Monopoly3Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected])lOMoARcPSD|1675695
Topic 9. Monopoly4Monopoly defined•A market structure with one seller•The monopoly produces a product or service that does not have close substitutes•The monopoly has the capacity to act as a price makerECON 1247Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected])lOMoARcPSD|1675695
Topic 9. Monopoly5Natural Monopoly •A natural monopoly is when a single producer develops economies of scale to an extent that one firm is able to supply the entire market at a lower average total cost than 2 or more firms.•Historically, natural monopolies have either been owned by the government (water, electricity, gas, public transport) or governments have regulated the prices charged by private natural monopoliesECON 1247Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected])lOMoARcPSD|1675695
Topic 9. Monopoly6Important to note•not all monopolies are natural monopoliesECON 1247Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected])lOMoARcPSD|1675695
Topic 9. Monopoly7RMIT University© A PossoPrice And Markets7Characteristics of Monopoly•high concentration ratio(single seller)•high barriers to entryeconomies of scale ( natural barrier to entry)ownership of raw materials Patents (artificial barrier to entry)licensing regulations (artificial barrier to entry)ECON 1247Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected])lOMoARcPSD|1675695
Topic 9. Monopoly8The demand curve faced by the monopoly•Because the monopoly is the sole producer, the market demand curve is also the monopolist’s demand curveSDDMarket Monopolist’s demand curveECON 1247Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected])lOMoARcPSD|1675695
Topic 9. Monopoly9The monopoly has a downward sloping demand curve•This means that the monopoly is a price maker•(in perfect competition where all economic agents are price takers, the demand curve is perfectly elastic, or horizontal)•Because the demand curve is downward sloping, the
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- Monopoly
