Page 166 - DECO405_MANAGERIAL_ECONOMICS

Pavitar Parkash Singh, Lovely Professional University
Unit 10: Imperfect Competition – Monopoly

Unit 10: Imperfect Competition – Monopoly Notes

CONTENTS
Objectives

Introduction
10.1 Features of Monopoly

10.2 Price and Output Decisions
10.2.1 Short Run Equilibrium

10.2.2 Long Run Equilibrium
10.3 Price Discrimination under Monopoly

10.4 Summary
10.5 Keywords

10.6 Self Assessment
10.7 Review Questions

10.8 Further Readings

Objectives

After studying this unit, you will be able to:

State the features of monopoly competition
Discuss the price and output decisions under monopoly
Explain the concept of price discrimination

Introduction

Monopoly is exactly opposite to the perfect competition. We can define a Monopolist as a sole
supplier to particular market. In fact, after going through this unit you will realise that monopoly
is an extreme case and it is rarely found in practice. However, we may also understand the case
of monopoly by analysing two different cases - one that is presented in textbooks which says
that in a monopoly there is only one firm producing the good. And other, the real world case
such as the operating system monopoly, that says that in monopoly there is one firm that
provides the overwhelming majority of sales (say, for example Microsoft), and a handful of
small companies that have little or no impact on the dominant firm. In this unit, we will stress
more on the former case.

10.1 Features of Monopoly

Monopoly is said to exist when one firm is the sole producer or seller of a product which has no
close substitutes. According to this definition, there must be a single producer or seller of a
product. If there are many producers producing a product, either perfect competition or

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