Price discrimination of this type proves particularly useful if the industry obeys the law of decreasing costs. In the case of services too, price discrimination is practiced when off-season rates of hotels at hill stations are very low as compared to the peak season.
The monopolist may discriminate between home and foreign buyers by selling at a lower price in the foreign market than in the domestic market. So no production is possible at any price on the ordinary d curve.
Pigou and John Robinson have analysed the circumstances under which price discrimination is harmful or beneficial to society. Thus when the monopoly firm is in long-run equilibrium, it is also in short- run equilibrium. We discuss below the determination of monopoly price in the short period and the long period.
AVC is the average variable cost curve. Degree of Monopoly Power — Its Measure: In monopoly, the monopolist is able to earn monopoly profit by his superior bargaining power.
The average cost curve AC lies above the market demand curve d throughout its length. For they know that it is physically impossible for a copper merchant to convert copper into coal for the purpose of transporting it cheaper.
In the short-run, the monopolist can charge a very high price because customers take time to What is a monopoly essay their habits, tastes and incomes to some other substitutes. Given the demand for his product, the monopolist can select the most profitable output against this demand. PA is thus per unit loss which the monopolist incurs.
Given these assumptions, the price, output and profits under monopoly are determined by the forces of demand and supply. Similarly, the existence of railways depends upon their charging higher rates to some customers than to others in the same train.
We discuss a few. This will be the level at which the slopes of TR and TC curves equal. The entire burden of the tax will be borne by the monopolist himself.
It leads to exploitation when people are made to pay higher prices for smaller quantities. In public utility services, the higher income groups are charged higher prices and the funds so collected may be used to subsidies the goods meant for the poor. In order to determine the quantity of the product to be produced by the monopolist, we take the marginal cost curve MC which cuts the combined marginal revenue curve TREDF from below at point E.
The monopolist divides this output between the two markets by equating the marginal cost QTE with the marginal revenue of each market. Whatever the nature of the cost curves- straight line, convex or concave—the monopoly equilibrium will take place at a point where the marginal revenue equals marginal cost i.
Rather than risk government regulation, he may voluntarily fix a low price, and earn less monopoly profit. He is also a price- maker who can set the price to his maximum advantage.
Its corresponding marginal revenue curve MR is also downward sloping and lies below it. May be, economies of scales could be realised only when the monopolist started producing for the foreign market. As a result of price regulation, the monopolist increases his output to OQ from OM.
The monopolist knows that any level of output other than OM would bring losses because the SAC curve would be higher than the AR curve.
This means that no other firms produce a similar product. A per unit tax on monopoly output has the effect of shifting both the average and marginal cost curves upward by the amount of the tax.
Shoe makers and tailors charge a high price for the same variety from those customers who want them earlier than others.
He treats all consumers alike and charges a uniform price for his product. Seventh, the sole manufacturer of a product may adopt a limit pricing policy in order to prevent the entry of new firms. Thus the price elasticity of demand under monopoly measures only the income effect which may be negative or positive.
Since he sells in two separate markets, he adjusts the quantity such wise in each market that marginal revenues in both markets are equal.
As emphasised by Mrs.
First, grant of a patent right to a firm by the government to make, use or sell its own invention.MONOPOLY A monopoly is an enterprise that is the only seller of a good or service.
In the absence of government intervention, a monopoly is free to set any price it chooses and will usually set the price that yields the largest possible profit. Courses and Consequences of Monopoly.
To start with, what is monopoly?
Monopoly is a state of market where there is only one supplier faces many buyers/5(9). Monopoly is an industry that has only one firm that sells a good which has no close substitutes. Monopoly firms also represent industries because there are no other firms in the market.
Products that are from monopoly market are electricity, water, cable television, local telephone services and many. Read this essay on Monopoly. Come browse our large digital warehouse of free sample essays.
Get the knowledge you need in order to pass your classes and more. Only at mint-body.com". Essay # 1. Meaning of Monopoly. Monopoly is a market situation in which there is only one seller of a product with barriers to entry of others.
The. Monopoly: A monopoly is a market with only one firm who is the only seller of its product, and there are no close substitutes to its product.
Also, monopoly has market power and can puts and control its own prices.Download