Page 178 - DECO101_MICRO_ECONOMICS_ENGLISH

Unit 11: Monopoly

In the short run the monopolist maximises his short run profits or minimises his short run Notes

losses if the following two conditions are satisfied: (i) MC = MR and (ii) The slope of MC
is greater than the slope of MR at the point of their intersection.
In the long run, the monopolist has the time to expand his plant or to intensively use his
existing plant which will maximise his profi ts.
A seller indulges in price discrimination when he sells the same product at different prices
to different buyers. A monopolist firm sells a single product in two different markets

either different elasticities of demand.
11.8 Keywords

Dumping: When the firm is a monopolistic in the domestic market but faces perfect competition

in the world market.

Equilibrium: Condition when the firm has no tendency either to increase or to contract its
output.
Imperfect competition: A market structure wherein individual firms exercise control over the

price to a smaller or larger degree depending upon the degree of imperfection present in a
case.
Market period: A very short period in which the supply is fixed, that is no adjustment can take

place in supply conditions.
Monopoly: Existence of a single producer or seller which is producing or selling a product which
has no close substitutes.
Perfect competition: A market structure characterized by a complete absence of rivalry among
the individual fi rms.

Profi t: Difference between total revenue and total cost.

11.9 Self Assessment

State whether the following statements are true or false:

1. In the case of monopoly one firm constitutes the whole industry.
2. In case of monopoly, the marginal revenue is less than the price.
3. In the short-run, a monopolist cannot be in equilibrium if MC cuts the MR curve from
below, even if MC=MR.

4. Monopoly represents an efficient use of resources at the macro level.
Choose the appropriate answer:
5. Given the same cost and revenue schedules, a profit-maximizing monopolist will

produce:
(a) less output than a competitive industry

(b) more output than a competitive industry
(c) the same amount of output as a competitive industry
(d) none of above.

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