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1- Discussing about what's monopoly

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

the highest valuations for the company's services.

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,

but gives the company an economic market force.

6- Monopolistic competition

Understanding Monopolistic Competition in Economics


1. Introduction to 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

advertising campaigns. In a monopolistic competitive setup, each firm faces a number of

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,

although competition is still present.

Key Characteristics of Monopolistic Competition

1. Introduction to Monopolistic Competition:

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.

2. Product Differentiation and Branding:

Companies offer products that aren't identical, leading to brand loyalty and consumer

preference. For example, various coffee brands—each has its own twist.

3. Ease of Entry and Exit:

New firms can enter the market relatively easily, and existing ones can leave without

significant barriers. Hence, the market isn't as rigid as a monopoly.

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.

5. Implications for Market Structure and Efficiency:

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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