Economics - monopoly

Perfectly competitive market
1-there are many sellers in the market
2-Products sold are homogeneous,identical
3-Each firm has a very small share of total shares
4-No seller in the market regards competing sellers as a threat
5-Information about the product is freeli available(prices,technologies)
6-Freedom of entry & exit inot the market by sellers;no bariers
Competitive firm-That sells in a perfectly competitive market in which it is a price taker-can only react to the market price & can't influence it econ.profit=TR-TC ; TR=PxQ ; AR=TR/Q=PxQ/Q=P


Pure monopoly
Condition that occurs when there's a single seller of a product that has no close substitutes
Monopoly power:tha ability of a firm to influence the price of its product by making more or less of it available to buyers
Barriers to entry:1-Government licences(UPC);2-patents & copyrights;3-ownership of the entire sypply of resources
Natural monopoly:when a company takes the whole market by inventing a new tech. and lowering its cost, so that other companies doesn't compete with it


Profit maximisation by monopoly firms:competitive firm produces until marginal revenue equals marginal costs(MR=MC).monopoly MR of additional output is less than the price at which that output is sold
Price discrimination:practice of selling a certain product of given quality and cost per unit at different prices to different buyers


Conditions before PD
1-ability to control the price of own products
2-product sold at different price must not be resaleable
3-the seller must be able to determine the willingness and abilty to pay vary among customers a monopolist will only engage in price discrimination if they can increase their profits by doing so benefits:1-large companies can affort to engage in research & development because they have the resources which small firms don't 2-technological inovations help bring the prices down in the long run social cost of monopoly-is a measure of the loss in potential benefits from the reduced availability of a good because the monopoloy controls the price of & supply of this good


Monopolistic competition
Exists when many sellers compete to sell differentiated products in a market into which entry of a new seller is pos
Characteristic
1-relatively large no.of firms with small share
2-product of each firm is not a substitute for products of ohther firms
3-firms don't consider the reaction of their rivals when choosing the price of their products;
4-relatiev freedom of entry & exit from this market
5-firms don't cooperate in any way to decrease competition or fix price
MC's also characterized by heavy cost for product development & adv.

Oligopoly
Market structure in which a few sellers dominate the sales of a good and wheer entry of new sellers is difficult or impossoble;product can be differentiated or standardised
Char.:
1-market centralisation:only few firms supply the entire market
2-some of the firms have large market share & can influence the price
3-firms are independent & react to proce changes by the rivals


Cartel-group of firms acting together to coordinate output decisions & control prices as if they were a single monopoly
Income distribution:FOP: labour wage; land rent; capital interest; enterpreneurship profit-the returns to FOP



Extra income:-dividends earned from shares; -social benefits if you are unemployed; -interests on saving account
Wage distribution:wage differ enormously from region to region


Demand for labour-determined by the marginal productivity of the labour input; supply of labour:4 dimension:1-population size,2-%of people gainfully employed,3-average no. of hours worked,3-qualty of prod.effort
When wage incr:-workers may decide to work longer hours(extra incom.)
May decide to work less hours because is happy with the wage

Factors that influence wage difference
1-compensation differentials
2-labour quality
3-unique element;
4-market segmentation

Profit=TR-TC; 3 factors(det.profit):1-profit as implicit return-oportunity cost of investing capital; 2-profit as reward for risk bearing & innovation

3-profit as monopoly returns
Land&capital:commonàdurable ,can be bought & sold,
Diff land:non-produced factor,capital:output of the economy