Rephras
Rephras
Rephras
While perfect competition is the essence of economics, monopoly is its greatest embodiment. The
study of how a monopolist determines price and output is crucial to comprehending the operation of
markets and the functioning of the economy. This chapter therefore begins with an overall view of
monopoly, explaining that the monopolist is the only supplier of a good for which there is no close
substitute and that it produces less and charges high prices compared to the perfect competitor.
Monopolist has a downward sloping demand curve means customers benefit from price differentials
in the form of price, or in the form of product; if the same price is levied for different quantities of a
good, a single price is charged regardless of the particular preferences of the buyers. But a
monopolist may change different prices for different quantities of goods, and different customers
may pay different prices for essentially the same product. Small to medium sized shareholders of a
mutual fund may pay a lower management fee than large investors. These groups are likely to have
Monopolists can price discriminate because different buyers have different valuations for the goods;
they have unique customer characteristics and are limited in number. If a merchant can price
discriminate, some buyers will pay higher prices than in a non-discriminative firm. If the monopolist
can collect some of this profit, it may be in a position to accept a lower price from some of the
clients, which satisfies the buyer and makes the monopolist worse off than a non-discriminative firm,
6- Monopolistic competition
In a monopolistic competitive industry, we have seen that there is only a limited degree of product
differentiation and that the price charged for a particular product is not irrelevant anymore. All
firms have to set their individual prices and have to put a non-negligible amount of effort into their
simultaneous cost and demand possibilities. As against the case of pure competition, the
monopolistic competitive firm now has a downward-sloping demand curve for its product, and
because of the product differentiation, it has some degree of control over the price it charges,
This market structure combines elements of monopoly and perfect competition. Think
lots of sellers, each with unique products, yet they all compete against each other.
Companies offer products that aren't identical, leading to brand loyalty and consumer
preference. For example, various coffee brands—each has its own twist.
New firms can enter the market relatively easily, and existing ones can leave without
4. Non-Price Competition:
Firms compete on factors other than price, like quality, customer service, and
marketing. So, it's not just about who’s cheaper but who’s better or more appealing.
While consumers benefit from variety and innovation, the market isn't as efficient as
perfect competition due to the power of individual firms over their own prices.
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