Page 255 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes 3. Restrictions on the Entry of the New Firms: In the field of monopoly, there are restrictions for
new firm to enter into the market. These restrictions have many forms like Patent proprietorship,
government laws, savings of coordinate etc.
4. No Close Substitutes: For goods that are being produced by monopolist should not have any close
substitutes otherwise monopolist will not be able to control the price of goods he produces, according
to his wish. According to Boulding, “A pure monopoly firm is that firm which is producing such a
product whose production by other firms outcomes no effective substitute.”
5. Price Maker: Monopolist determines the price,
which means he himself determines the price of Monopolist is Price Maker.
his product. This is because he is the only supplier
of goods but the number of buyers being very Yes monopolist is price maker. Price of goods is
large. The demand of single buyer is very small totally controlled by monopolist. The reason is—
portion of total demand, that is why buyer would — Monopolist is the only supplier, whereas it has
not be able to affect the price, and they have to large number of buyer.
borne the price determined by monopolist. In — There is no close subtitle of the goods that
other words price of goods is totally controlled by monopolist produces.
monopolist. If monopolist increases the supply of — There are so many legal, practical and technical
goods then their price may fall. Opposite to it if to restrictions on the entry of new firm.
he decreases the supply, the price may rise.
6. Price Discrimination: Monopolist for any goods could charge differently to different buyers and
for different purposes. In this way price discrimination is done by monopolies.
7. Absence of Supply Curve: In the situation of monopoly there is no supply curve. Taking both
marginal revenue and marginal cost into consideration, he decides how much quantity to be produced
and what price to be charged. So in monopoly no supply curve exists.

Self Assessment

Fill in the blanks:
1. Monopolist is the ............... maker.
2. English word monopoly has been taken from Greek word .............. .
3. Slope of demand curve in monopoly is from top to .............. .
4. Monopoly is that market where for any goods there is only one .............. .

13.3 Monopoly Equilibrium or Determination of Price and Output Under
Monopoly

Monopolist is said to be at the state of equilibrium, where he produces that much amount of goods by
which determination of price and equilibrium can be studied within following two approaches:
1. Total Revenue and Total cost curve Approach.
2. Marginal Revenue and Marginal cost Approach.

Monopoly is that situation of market where only one firm is the sole producer of goods.
There is no close substitutes of those goods.

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