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    Imperfect Competition

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    makkarster

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    © All Rights Reserved
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    Imperfect Competition

    Uploaded by

    makkarster
    1 views13 pages

    Original Title

    Imperfect Competition (2)

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    Copyright:

    © All Rights Reserved
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    1 views13 pages

    Imperfect Competition

    Uploaded by

    makkarster

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 13

    IMPERFECT

    COMPETITION
    Introduction

     A type of market that does not operate under the rigid rules
    of perfect competition.
     Imperfect competition is a market situation where individual
    firms have a measure of control over the price of the
    commodity in an industry.
     a firm that can affect the market price of its output can be
    classified as an imperfect competitor.
     Normally, imperfect competition arises when an industry's
    output is supplied only by one, or a relatively small number of
    firms.
    Forms of imperfect competition
    include

     Monopoly,
     Oligopoly,
     Monopolistic
    competition,
     Monophony and
     Oligopsony.
    Sources of market
    imperfection
     Imperfect competition often arises
    when an industry’s output is supplied
    by one or a small number of firms.
     This may be traced to
     the existence of barriers to entry and
     the existence of significant
    differences
     or advantages in cost conditions.
    Monopoly
    •A monopoly (from Greek monos / μονος (alone or
    single) + polein / πωλειν (to sell)) exists when a
    specific person or enterprise is the only supplier of a
    particular commodity.
    A monopoly is a situation when only one seller of a
    good or service stay in the market .
    In monopoly enterprise is free to set any price it
    chooses and will usually set the price that yields the
    largest possible profit.
    Legal Restrictions
    • Oneway to prevent new firms from entering a
    market is to make entry illegal

    • Patents,
    licenses, and other legal restrictions
    imposed by the government provide some
    producers with legal protection against
    competition
    Patent and Invention
    Incentives
    •Apatent awards an inventor the
    exclusive right to produce a good or
    service for 20 years

    •Patent laws
    •Encourage inventors to invest the time
    and money required to discover and
    develop new products and processes
    •Also provide the stimulus to turn an
    invention into a marketable product, a
    process called innovation
    Licenses and other Entry
    Restrictions
    •Governments often confer
    monopoly status by awarding a
    single firm the exclusive right to
    supply a particular good or service

    •Broadcast TV and radio rights

    •State licensing of hospitals

    •Cable TV and electricity on local level


    Features or Characteristics of
    Monopoly
     Single seller
     no close substitutes for the product.
     No free entry and exit
     A complete negation of competition.
     Monopolist is a price maker.
     The firm and industry are one and
    same
     Monopoly firm faces downward sloping
    demand curve.
     It means he can sell more at lower
    price and vice versa.
     Therefore, elasticity of demand factor
    is very important for Monopolist
    Economies of Scale

    •A monopoly sometimes emerges naturally when


    a firm experiences economies of scale as
    reflected by the downward-sloping, long-run
    average cost curve

    • Inthese situations, a single firm can sometimes


    supply market demand at a lower average cost
    per unit than could two or more firms at smaller
    rates of output
    Natural Monopoly
    • Becausesuch a monopoly emerges from the
    nature of costs, it is called a natural monopoly

    •Anew entrant cannot sell enough output to


    experience the economies of scale enjoyed by
    an established natural monopolist  entry into
    the market is naturally blocked
    Profit Under Monopoly
    Government intervention in
    Monopoly

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